DXC Technology Co 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34 ) 60 Consolidated Balance Sheets as of March 31, 2025 and March 31, 2024 62 Consolidated Statements of Operations for the Fiscal Years Ended March 31, 2025, March 31, 2024 and March 31, 2023 63 Consolidated Statements of Comprehensive Income (Loss) for the Fiscal Years Ended March 31, 2025, March 31, 2024 and March 31, 2023 64 Consolidated Statements of Cash Flows for the Fiscal Years Ended March 31, 2025, March 31, 2024 and March 31, 2023 65 Consolidated Statements of Changes in Equity for the Fiscal Years Ended March 31, 2025, March 31, 2024 and March 31, 2023 67 Notes to Consolidated Financial Statements Note 1–Summary of Significant Accounting Policies 68 Note 2–Divestitures 78 Note 3–Earnings (Loss) Per Share 79 Note 4–Receivables 80 Note 5–Leases 80 Note 6–Derivative Instruments 83 Note 7–Property and Equipment 85 Note 8–Intangible Assets 86 Note 9–Goodwill 86 Note 10–Debt 88 Note 11–Revenue 88 Note 12–Restructuring Costs 91 Note 13–Pension and Other Benefit Plans 92 Note 14–Income Taxes 98 Note 15–Stockholders' Equity 106 Note 16–Stock Incentive Plans 107 Note 17–Cash Flows 111 Note 18–Other (Income) Expense, Net 111 Note 19–Segment and Geographic Information 111 Note 20–Commitments and Contingencies 114 59 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of DXC Technology Company Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of DXC Technology Company and subsidiaries (the "Company") as of March 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), cash flows, and changes in equity, for each of the three years in the period ended March 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended March 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 31, 2025, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated May 14, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Revenue Recognition — Refer to Notes 1 and 11 to the financial statements Critical Audit Matter Description Certain of the Company’s contracts with customers involve multiple performance obligations and may contain embedded leases, which are assessed for classification and are typically recognized either as sales-type leases or as operating leases. When the Company enters into such arrangements, the contract’s transaction price is allocated to the contract performance obligations and the lease component based upon the relative standalone selling price. These conclusions could impact the timing of revenue recognition . 60 Additionally, the Company’s contracts with customers may be modified over the course of the contract term which may change the scope, price, or both, of the existing contract. Contract modifications are reviewed to determine whether they should be accounted for as part of the original contract, the termination of an existing contract and the creation of a new contract, or as a separate contract. If the contract modification is part of the existing contract, a cumulative adjustment to revenue is recorded. If the contract modification represents the termination of the existing contract and the creation of a new contract, the modified transaction price is allocated to the prospective performance obligations and any embedded lease components. If a contract modification modifies an embedded lease component and the modification is not accounted for as a separate contract, the classification of the lease is reassessed. Given these factors related to complex new contracts with customers and modifications of such contracts in the current fiscal year, the related audit effort in evaluating complex revenue arrangements was significant and required a high degree of auditor judgment. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the Company’s revenue recognition for complex new and modified revenue arrangements included the following : • We tested the effectiveness of internal controls related to the review of revenue recognition conclusions for new and modified contracts. • We analyzed the population of material revenue arrangements and performed the following procedures on a selection of new or modified contracts: – Obtained and read the customer contract and evaluated management’s identification of performance obligations. – Evaluated management’s determination of standalone selling price for the identified performance obligations. – Recalculated the transaction price and tested the allocation of transaction price to each performance obligation. – Evaluated the pattern of delivery and revenue recognition timing for each performance obligation. /s/ Deloitte & Touche LLP McLean, Virginia May 14, 2025 We have served as the Company's auditor since at least 1965; however, an earlier year could not be reliably determined. 61 DXC TECHNOLOGY COMPANY CONSOLIDATED BALANCE SHEETS As of (in millions, except per share and share amounts) March 31, 2025 March 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 1,796 $ 1,224 Receivables and contract assets, net of allowance for doubtful accounts of $ 32 and $ 35 2,972 3,253 Prepaid expenses 477 512 Other current assets 118 146 Total current assets 5,363 5,135 Intangible assets, net of accumulated amortization of $ 6,241 and $ 5,792 1,642 2,130 Operating lease assets, net 635 731 Goodwill 526 532 Deferred income taxes, net 819 804 Property and equipment, net of accumulated depreciation of $ 3,409 and $ 3,515 1,253 1,671 Other assets 2,967 2,857 Assets held for sale - non-current — 11 Total Assets $ 13,205 $ 13,871 LIABILITIES and EQUITY Current liabilities: Short-term debt and current maturities of long-term debt $ 880 $ 271 Accounts payable 549 846 Accrued payroll and related costs 571 558 Operating lease liabilities 227 282 Accrued expenses and other current liabilities 1,358 1,437 Deferred revenue and advance contract payments 762 866 Income taxes payable 64 134 Total current liabilities 4,411 4,394 Long-term debt, net of current maturities 2,996 3,818 Non-current deferred revenue 635 671 Non-current income tax liabilities and deferred income taxes 495 556 Non-current operating lease liabilities 444 497 Non-current pension obligations 387 423 Other long-term liabilities 347 446 Total Liabilities 9,715 10,805 Commitments and contingencies DXC stockholders’ equity: Preferred stock, par value $ 0.01 per share; authorized 1,000,000 shares; none issued as of March 31, 2025 and March 31, 2024 — — Common stock, par value $ 0.01 per share; authorized 750,000,000 shares; issued 186,856,421 as of March 31, 2025 and 183,430,878 as of March 31, 2024 2 2 Additional paid-in capital 7,677 7,599 Accumulated deficit ( 3,451 ) ( 3,839 ) Accumulated other comprehensive loss ( 762 ) ( 732 ) Treasury stock, at cost, 5,653,666 and 4,591,340 shares as of March 31, 2025 and March 31, 2024 ( 237 ) ( 219 ) Total DXC stockholders’ equity 3,229 2,811 Non-controlling interest in subsidiaries 261 255 Total Equity 3,490 3,066 Total Liabilities and Equity $ 13,205 $ 13,871 The accompanying notes are an integral part of these consolidated financial statements. 62 DXC TECHNOLOGY COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS Fiscal Years Ended (in millions, except per-share amounts) March 31, 2025 March 31, 2024 March 31, 2023 Revenues $ 12,871 $ 13,667 $ 14,430 Costs of services (excludes depreciation and amortization and restructuring costs) 9,770 10,576 11,246 Selling, general and administrative (excludes depreciation and amortization and restructuring costs) 1,348 1,244 1,375 Depreciation and amortization 1,287 1,404 1,519 Restructuring costs 153 111 216 Interest expense 265 298 200 Interest income ( 199 ) ( 214 ) ( 135 ) Gain on disposition of businesses ( 7 ) ( 79 ) ( 190 ) Other (income) expense, net ( 376 ) 218 1,084 Total costs and expenses 12,241 13,558 15,315 Income (loss) before income taxes 630 109 ( 885 ) Income tax expense (benefit) 234 23 ( 319 ) Net income (loss) 396 86 ( 566 ) Less: net income (loss) attributable to non-controlling interest, net of tax 7 ( 5 ) 2 Net income (loss) attributable to DXC common stockholders $ 389 $ 91 $ ( 568 ) Income (loss) per common share: Basic $ 2.15 $ 0.46 $ ( 2.48 ) Diluted $ 2.10 $ 0.46 $ ( 2.48 ) The accompanying notes are an integral part of these consolidated financial statements. 63 DXC TECHNOLOGY COMPANY CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Net income (loss) $ 396 $ 86 $ ( 566 ) Other comprehensive (loss) income, net of taxes: Foreign currency translation adjustments, net of tax (1) ( 9 ) 39 ( 336 ) Cash flow hedges adjustments, net of tax (2) ( 7 ) 7 ( 17 ) Pension and other post-retirement benefit plans, net of tax: Prior service cost, net of tax (3) ( 10 ) ( 6 ) ( 2 ) Amortization of prior service cost, net of tax (4) ( 4 ) ( 5 ) ( 36 ) Pension and other post-retirement benefit plans, net of tax ( 14 ) ( 11 ) ( 38 ) Other comprehensive (loss) income, net of taxes ( 30 ) 35 ( 391 ) Comprehensive income (loss) 366 121 ( 957 ) Less: comprehensive income (loss) attributable to non-controlling interest 7 ( 12 ) — Comprehensive income (loss) attributable to DXC common stockholders $ 359 $ 133 $ ( 957 ) (1) Tax (benefit) expense related to foreign currency translation adjustments was $ 0 , $( 4 ), and $ 2 for the fiscal years ended March 31, 2025, March 31, 2024, and March 31, 2023, respectively. (2) Tax (benefit) expense related to cash flow hedge adjustments was $( 2 ), $ 3 , and $( 6 ) for the fiscal years ended March 31, 2025, March 31, 2024, and March 31, 2023, respectively. (3) Tax benefit related to prior service costs was $ 3 , $ 0 , and $ 1 for the fiscal years ended March 31, 2025, March 31, 2024, and March 31, 2023, respectively. (4) Tax benefit related to amortization of prior service costs was $ 1 , $ 1 , and $ 15 for the fiscal years ended March 31, 2025, March 31, 2024, and March 31, 2023, respectively. The accompanying notes are an integral part of these consolidated financial statements. 64 DXC TECHNOLOGY COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Cash flows from operating activities: Net income (loss) $ 396 $ 86 $ ( 566 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,313 1,433 1,551 Operating right-of-use expense 309 353 404 Pension & other post-employment benefits, actuarial & settlement (gains) losses ( 232 ) 445 1,431 Share-based compensation 79 109 108 Deferred taxes ( 35 ) ( 416 ) ( 609 ) Loss (gain) on dispositions 24 ( 131 ) ( 260 ) Provision for losses on accounts receivable 12 — ( 1 ) Unrealized foreign currency exchange losses (gains) 40 ( 7 ) 8 Impairment losses and contract write-offs 32 18 47 Amortization of debt issuance costs and discount 5 5 4 Cash surrender value in excess of premiums paid ( 12 ) ( 14 ) ( 17 ) Other non-cash charges, net 7 9 4 Changes in assets and liabilities, net of effects of acquisitions and dispositions: Decrease in receivables 320 176 412 (Increase) Decrease in prepaid expenses and other current assets ( 81 ) 211 ( 119 ) Decrease in accounts payable and accruals ( 335 ) ( 278 ) ( 424 ) (Decrease) Increase in income taxes payable and income tax liability ( 57 ) 13 ( 161 ) Decrease in operating lease liability ( 309 ) ( 353 ) ( 404 ) (Decrease) Increase in advance contract payments and deferred revenue ( 78 ) ( 290 ) 11 Other operating activities, net — ( 8 ) ( 4 ) Net cash provided by operating activities 1,398 1,361 1,415 Cash flows from investing activities: Purchases of property and equipment ( 248 ) ( 182 ) ( 267 ) Payments for transition and transformation contract costs ( 135 ) ( 198 ) ( 223 ) Software purchased and developed ( 328 ) ( 225 ) ( 188 ) Business dispositions 26 26 ( 147 ) Proceeds from sale of assets 161 75 171 Other investing activities, net 12 13 19 Net cash used in investing activities ( 512 ) ( 491 ) ( 635 ) Cash flows from financing activities: Borrowings of commercial paper 367 1,784 1,514 Repayments of commercial paper ( 369 ) ( 1,887 ) ( 1,757 ) Principal payments on long-term debt — — ( 63 ) Payments on finance leases and borrowings for asset financing ( 298 ) ( 430 ) ( 511 ) Proceeds from stock options and other common stock transactions — — 2 Taxes paid related to net share settlements of share-based compensation awards ( 20 ) ( 35 ) ( 17 ) Repurchase of common stock ( 14 ) ( 898 ) ( 669 ) Other financing activities, net 17 ( 21 ) ( 6 ) Net cash used in financing activities ( 317 ) ( 1,487 ) ( 1,507 ) Effect of exchange rate changes on cash and cash equivalents 3 ( 17 ) ( 97 ) 65 Net increase (decrease) in cash and cash equivalents including cash classified within current assets held for sale 572 ( 634 ) ( 824 ) Cash classified within current assets held for sale — — 10 Net increase (decrease) in cash and cash equivalents 572 ( 634 ) ( 814 ) Cash and cash equivalents at beginning of year 1,224 1,858 2,672 Cash and cash equivalents at end of year $ 1,796 $ 1,224 $ 1,858 The accompanying notes are an integral part of these consolidated financial statements. 66 DXC TECHNOLOGY COMPANY CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (in millions, except shares in thousands) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock (1) Total DXC Equity Non- Controlling Interest Total Equity Shares Amount Balance at March 31, 2022 240,508 $ 3 $ 10,057 $ ( 4,450 ) $ ( 385 ) $ ( 173 ) $ 5,052 $ 323 $ 5,375 Net loss ( 568 ) ( 568 ) 2 ( 566 ) Other comprehensive loss ( 389 ) ( 389 ) ( 2 ) ( 391 ) Share-based compensation expense 98 98 98 Acquisition of treasury stock ( 14 ) ( 14 ) ( 14 ) Share repurchase program (2) ( 24,437 ) ( 1 ) ( 1,036 ) 354 ( 683 ) ( 683 ) Stock option exercises and other common stock transactions 1,987 1 1 1 Non-controlling interest distributions and other 1 ( 1 ) — — Balance at March 31, 2023 218,058 $ 2 $ 9,121 $ ( 4,665 ) $ ( 774 ) $ ( 187 ) $ 3,497 $ 323 $ 3,820 (1) 3,333,592 treasury shares as of March 31, 2023 (in millions, except shares in thousands) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock (1) Total DXC Equity Non- Controlling Interest Total Equity Shares Amount Balance at March 31, 2023 218,058 $ 2 $ 9,121 $ ( 4,665 ) $ ( 774 ) $ ( 187 ) $ 3,497 $ 323 $ 3,820 Net income 91 91 ( 5 ) 86 Other comprehensive loss 42 42 ( 7 ) 35 Share-based compensation expense 107 107 107 Acquisition of treasury stock ( 32 ) ( 32 ) ( 32 ) Share repurchase program (2) ( 38,445 ) ( 1,626 ) 734 ( 892 ) ( 892 ) Stock option exercises and other common stock transactions 3,818 — — Non-controlling interest distributions and other ( 3 ) 1 ( 2 ) ( 56 ) ( 58 ) Balance at March 31, 2024 183,431 $ 2 $ 7,599 $ ( 3,839 ) $ ( 732 ) $ ( 219 ) $ 2,811 $ 255 $ 3,066 (1) 4,591,340 treasury shares as of March 31, 2023 (in millions, except shares in thousands) Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Loss Treasury Stock (1) Total DXC Equity Non- Controlling Interest Total Equity Shares Amount Balance at March 31, 2024 183,431 $ 2 $ 7,599 $ ( 3,839 ) $ ( 732 ) $ ( 219 ) $ 2,811 $ 255 $ 3,066 Net income 389 389 7 396 Other comprehensive income ( 30 ) ( 30 ) ( 30 ) Share-based compensation expense 78 78 78 Acquisition of treasury stock ( 18 ) ( 18 ) ( 18 ) Stock option exercises and other common stock transactions 3,425 — — Non-controlling interest distributions and other ( 1 ) ( 1 ) ( 1 ) ( 2 ) Balance at March 31, 2025 186,856 $ 2 $ 7,677 $ ( 3,451 ) $ ( 762 ) $ ( 237 ) $ 3,229 $ 261 $ 3,490 (1) 5,653,666 treasury shares as of March 31, 2025 (2) On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (the "IRA") into law. The IRA imposes a 1% excise tax on share repurchases completed after December 31, 2022. We reflect the excise tax within equity as part of the repurchase of the common stock. The accompanying notes are an integral part of these consolidated financial statements. 67 DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies Business DXC Technology Company ("DXC," the "Company," "we," "us," or "our") is a leading global provider of IT services. We are a trusted partner to many of the world’s most innovative organizations, building solutions that move industries and companies forward. Our engineering, consulting, and technology experts help clients simplify, optimize, and modernize their systems and processes, manage their most critical workloads, integrate AI-powered intelligence into their operations, and put security and trust at the forefront. Through innovative solutions, we help clients to achieve competitive advantages in the marketplace. We serve a global client base, including many Fortune 500 companies, through our more than 120,000 people in over 60 countries. We operate through two segments - Global Business Services ("GBS") and Global Infrastructure Services ("GIS") - delivering solutions that modernize operations and drive innovation across our customers' entire IT estate. Basis of Presentation In order to make this report easier to read, DXC refers throughout to (i) the Consolidated Financial Statements as the “financial statements,” (ii) the Consolidated Statements of Operations as the “statements of operations,” (iii) the Consolidated Statements of Comprehensive Income (Loss) as the "statements of comprehensive income (loss)," (iv) the Consolidated Balance Sheets as the “balance sheets,” and (v) the Consolidated Statements of Cash Flows as the “statements of cash flows.” In addition, references are made throughout to the numbered Notes to the Consolidated Financial Statements (“Notes”) in this Annual Report on Form 10-K. The accompanying financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission for annual reports and accounting principles generally accepted in the United States ("GAAP"). The financial statements include the accounts of DXC, its consolidated subsidiaries, and those business entities in which DXC maintains a controlling interest. Investments in business entities in which the Company does not have control, but has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method. Other investments are accounted for by the cost method. Non-controlling interests are presented as a separate component within equity in the balance sheets. Net earnings attributable to the non-controlling interests are presented separately in the statements of operations, and comprehensive income (loss) attributable to non-controlling interests are presented separately in the statements of comprehensive income (loss). All intercompany transactions and balances have been eliminated. Use of Estimates The preparation of the financial statements, in accordance with GAAP, requires the Company's management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities. The Company bases its estimates on assumptions regarding historical experience, currently available information, and anticipated developments that it believes are reasonable and appropriate. However, because the use of estimates involves an inherent degree of uncertainty, actual results could differ from those estimates. Estimates are used for, but not limited to, contracts accounted for using the percentage-of-completion method, cash flows used in the evaluation of impairment of goodwill and other long-lived assets, reserves for uncertain tax positions, valuation allowances on deferred tax assets, loss accruals for litigation, and obligations related to our pension plans. In the opinion of the Company's management, the accompanying financial statements contain all adjustments necessary, including those of a normal recurring nature, to fairly present the financial statements. 68 DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Leases The Company determines if an arrangement is or contains a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether DXC obtains substantially all economic benefits from and has the ability to direct the use of the asset. Operating leases are reported as operating right-of-use ("ROU") assets, net, with the associated liabilities included in current operating lease liabilities and non-current operating lease liabilities in DXC's balance sheets. Finance leases are included in property and equipment, net, and the associated liabilities are included in short-term debt and current maturities of long-term debt and long-term debt, net of current maturities in DXC's balance sheets. Lease assets represent the Company's right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Lease liabilities are recognized at commencement based on the present value of fixed or in-substance fixed lease payments over the lease term. Leased assets are recognized at commencement based on the leased liability plus any lease payments made at or before lease commencement and excluding any lease incentives. As most of the Company's leases do not provide an implicit rate, DXC uses its incremental borrowing rate based on the information available at commencement to determine the present value of lease payments. The incremental borrowing rate is the rate of interest that DXC would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term. The rate is dependent on several factors, including the lease term, currency of the lease payments and the Company's credit ratings. The Company's lease terms may include options to extend or terminate the lease. Leased assets and lease liabilities include these options when it is reasonably certain that they will be exercised. The Company's lease arrangements generally do not contain any residual value guarantees or material restrictive covenants. Operating lease expense, which includes interest, is recognized on a straight-line basis over the lease term with variable payments, primarily related to the operational costs for the Company's leased real estate for offices, recognized as incurred. Assets obtained under finance leases are recorded as fixed assets and depreciated over the shorter of the depreciable life of the asset or the lease term with interest recognized as it is incurred. The Company combines lease and non-lease components under its lease agreements. Revenue Recognition The Company's primary service offerings are information technology outsourcing, other professional services, or a combination thereof. Revenues are recognized when control of the promised goods or services is transferred to DXC's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. DXC determines revenue recognition through the five-step model as follows: • Identification of the contract, or contracts, with a customer • Identification of the performance obligations in the contract • Determination of the transaction price • Allocation of the transaction price to the identified performance obligations • Recognition of revenue when, or as, the Company satisfies a performance obligation 69 DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DXC's IT outsourcing ("ITO") arrangements typically reflect a single performance obligation that comprises a series of distinct services which are substantially the same and provided over a period of time using the same measure of progress. Revenue derived from these arrangements is recognized over time based upon the level of services delivered in the distinct periods in which they are provided based on time increments. When other parties are involved in providing goods or services as part of our customer arrangements, DXC recognizes revenue on a gross basis as a principal when it controls goods or services before they are transferred to the customer. In addition, the Company reports revenue net of any revenue-based taxes assessed by a governmental authority that are imposed on and concurrent with specific revenue-producing transactions, such as sales taxes and value-added taxes. DXC's contracts often include upfront fees billed for activities to familiarize DXC with the customers' operations, take control over their administration and operation, and adapt them to DXC's solutions. These activities typically do not qualify as performance obligations, and the related revenues are allocated to the relevant performance obligations and recognized ratably over time as the performance obligation is satisfied during the period in which DXC provides the related service, which is typically the life of the contract. Software transactions that include multiple performance obligations are described below. For contracts with multiple performance obligations, DXC allocates the contract’s transaction price to each performance obligation based on the relative standalone selling price of each distinct good or service in the contract. Other than software sales involving multiple performance obligations, the primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which the Company forecasts its expected costs of satisfying a performance obligation and then adds an appropriate margin for that distinct good or service. DXC's ITO arrangements may also contain embedded leases for equipment used to fulfill services. A contract with a customer includes an embedded lease when DXC grants the customer a right to control the use of an identified asset for a period of time in exchange for consideration. Embedded leases with customers are typically recognized either as sales type leases in which revenue and co st of sales is recognized upon lease commencement; or they may be recognized as operating leases in which revenue is recognized over the usage period. Where a contract contains an embedded lease, the contract’s transaction price is allocated to the contract performance obligations and the lease component based upon the relative standalone selling price. The transaction price of a contract is determined based on fixed and variable consideration. Variable consideration related to the Company’s ITO offerings often includes volume-based pricing that is allocated to the distinct days of the services to which the variable consideration pertains. However, in certain cases, estimates of variable consideration, including penalties, contingent milestone payments and rebates are necessary. The Company only includes estimates of variable consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur. These judgments involve consideration of historical and expected experience with the customer and other similar customers, and the facts and circumstances specific to the arrangement. Contracts with our customers may be modified over the course of the contract term and we may change the scope, price or both of the existing contracts. Contract modifications are reviewed to determine whether they should be accounted for as part of the original contract, the termination of an existing contract and the creation of a new contract, or as a separate contract. Contract modifications are a separate contract when the modification provides additional goods and services that are distinct and the transaction price is at the standalone selling price. If the contract modification is part of the existing contract, a cumulative adjustment to revenue is recorded. If the contract modification represents the termination of the existing contract and the creation of a new contract, the modified transaction price is allocated to the prospective performance obligations and any embedded lease components. If a contract modification modifies an embedded lease component and the modification is not accounted for as a separate contract, the classification of the lease is reassessed. The Company generally provides its services under time and materials contracts, unit-price contracts, fixed-price contracts, and software contracts for which revenue is recognized in the following manner: Time and materials contracts . Revenue is recognized over time at agreed-upon billing rates when services are provided. Unit-price contracts. Revenue is recognized over time based on unit metrics multiplied by the agreed-upon contract unit price or when services are delivered. 70 DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Fixed-price contracts. For certain fixed-price contracts, revenue is recognized over time using a method that measures the extent of progress towards completion of a performance obligation, generally using a cost-input method (referred to as the percentage-of-completion cost-to-cost method). Under the percentage-of-completion cost-to-cost method, revenue is recognized based on the proportion of total cost incurred to estimated total costs at completion. A performance obligation's estimate at completion includes all direct costs such as materials and labor. Profit in a given period is reported at the estimated profit margin to be achieved on the overall contract. If estimated total costs at completion exceed estimated revenue for a contract under the percentage-of-completion cost-to-cost method, the loss is recognized in the quarter it first becomes probable and reasonably estimable. If output or input measures are not available or cannot be reasonably estimated, revenue is deferred until progress can be measured and costs are not deferred unless they meet the criteria for capitalization. Software contracts. Certain of DXC's arrangements involve the sale of DXC proprietary software, post-contract customer support, and other software-related services. The standalone selling price generally is determined for each performance obligation using an adjusted market assessment approach based on the price charged where each deliverable is sold separately. In certain limited cases (typically for software licenses) when the historical selling price is highly variable, the residual approach is used. This approach allocates revenue to the performance obligation equal to the difference between the total transaction price and the observable standalone selling prices for the other performance obligations. Revenue from distinct software licenses is recognized at a point in time when the customer can first use the software license. If significant customization is required, software revenue is recognized as the related software customization services are performed in accordance with the percentage-of-completion cost-to-cost method described above. Revenue for post-contract customer support and other software services is recognized over time as those services are provided . Practical Expedients DXC does not adjust the promised amount of consideration for the effects of a significant financing component when the period between when DXC transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less. Contract Balances The timing of revenue recognition, billings and cash collections results in accounts receivable (billed receivables, unbilled receivables and contract assets) and deferred revenue and advance contract payments (contract liabilities) on the Company's balance sheets. In arrangements that contain an element of customized software solutions, amounts are generally billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g. monthly) or upon achievement of certain contractual milestones. Generally, billing occurs subsequent to revenue recognition, sometimes resulting in contract assets if the related billing is conditional upon more than just the passage of time. However, the Company sometimes receives advances or deposits from customers, before revenue is recognized, which results in the generation of contract liabilities. Payment terms vary by type of product or service being provided as well as by customer, although the term between invoicing and when payment is due is generally an insignificant period of time. Costs to Obtain a Contract Certain sales commissions earned by the Company's sales force are considered incremental and recoverable costs of obtaining a contract with a customer. The majority of sales commissions are paid based on the achievement of quota-based targets. These costs are deferred and amortized on a straight-line basis over an average period of benefit determined to be five years . The Company determined the period of benefit considering the length of its customer contracts, its technology, and other factors. Some commission payments are not capitalized because they are expensed during the fiscal year as the related revenue is recognized. Capitalized sales commissions costs are classified within other assets and amortized in selling, general and administrative expenses. 71 DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Costs to Fulfill a Contract Certain contract setup costs incurred upon initiation or renewal of an outsourcing contract that generate or enhance resources to be used in satisfying future performance obligations are capitalized when they are deemed recoverable. Judgment is applied to assess whether contract setup costs are capitalizable. Costs that generate or enhance resources often pertain to activities that enhance the capabilities of the services, improve customer experience, and establish a more effective and efficient IT environment. The Company recognizes these transition and transformation contract costs as other assets, which are amortized over the respective contract life. Pension and Other Benefit Plans The Company accounts for its pension, other post-retirement benefit ("OPEB"), defined contribution and deferred compensation plans using the guidance of ASC 710 "Compensation – General" and ASC 715 "Compensation – Retirement Benefits." The Company recognizes actuarial gains and losses and changes in fair value of plan assets in earnings at the time of plan remeasurement as a component of net periodic benefit expense. Typically plan remeasurement occurs annually during the fourth quarter of each fiscal year. The remaining components of pension and OPEB expense, primarily current period service and interest costs and expected return on plan assets, are recorded on a quarterly basis. Inherent in the application of the actuarial methods are key assumptions, including, but not limited to, discount rates, expected long-term rates of return on plan assets, mortality rates, rates of compensation increases, and medical cost trend rates. Company management evaluates these assumptions annually and updates assumptions as necessary. The fair value of assets is determined based on the prevailing market prices or estimated fair value of investments when quoted prices are not available. Software Development Costs After establishing technological feasibility, and until such time as the software products are available for general release to customers, the Company capitalizes costs incurred to develop commercial software products to be sold, leased or otherwise marketed. Costs incurred to establish technological feasibility are charged to expense as incurred. Enhancements to software products are capitalized when such enhancements extend the life or significantly expand the marketability of the products. Amortization of capitalized software development costs is determined separately for each software product. Annual amortization expense is calculated based on the greater of the ratio of current gross revenues for each product to the total of current and anticipated future gross revenues for the product or the straight-line amortization method over the estimated useful life of the product. Unamortized capitalized software costs associated with commercial software products are periodically evaluated for impairment on a product-by-product basis by comparing the unamortized balance to the product’s net realizable value. The net realizable value is the estimated future gross revenues from that product reduced by the related estimated future costs. When the unamortized balance exceeds the net realizable value, the unamortized balance is written down to the net realizable value and an impairment charge is recorded. The Company capitalizes costs incurred to develop internal-use computer software during the application development stage. Costs related to preliminary project activities and post-implementation activities are expensed as incurred. Internal and external costs incurred in connection with development of upgrades or enhancements that result in additional functionality are also capitalized. Capitalized costs associated with internal-use software are amortized on a straight-line basis over the estimated useful life of the software. Purchased software is capitalized and amortized over the estimated useful life of the software. Internal-use software assets are evaluated for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. 72 DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Share-Based Compensation Share-based awards are accounted for under the fair value method. The Company provides different forms of share-based compensation to its employees and non-employee directors. This generally includes restricted stock units ("RSUs"), including performance-based restricted stock units ("PSUs"). The fair value of awards is determined on the grant date, based on the Company's closing stock price. The Company uses a Monte Carlo simulation model to compute the estimated fair value of PSUs with a market condition. This model includes assumptions regarding term, risk-free interest rates, expected volatility and dividend yields, which are evaluated each time the Company issues an award. The risk-free rate equals the yield, as of the Valuation Date on semi-annual zero-coupon U.S. Treasury rates. The dividend yield assumption is based on the respective fiscal year dividend payouts. Expected volatility is based on a historical approach and the Company considers the performance period of the award. For awards settled in shares, the Company recognizes compensation expense based on the grant-date fair value net of estimated forfeitures over the vesting period. For awards settled in ca sh, the Company recognizes compensation expense based on the fair value at each reporting date net of estimated forfeitures. Goodwill Impairment Analysis The Company tests goodwill for impairment on an annual basis as of the first day of the second fiscal quarter and between annual tests if circumstances change, or if an event occurs that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company has defined its reporting units as its reportable segments. A significant amount of judgment is involved in determining whether an event indicating impairment has occurred between annual testing dates. Such indicators include: a significant decline in the Company's stock price, a significant decline in expected future cash flows, a significant adverse change in legal factors or in the business climate, unanticipated competition, the disposal of a significant component of a reporting unit and the testing for recoverability of a significant asset group within a reporting unit. The Company initially assesses qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This qualitative assessment considers all relevant factors specific to the reporting units, including macroeconomic conditions, industry and market considerations, overall financial performance, and relevant entity-specific events. If the Company determines that it is not more likely than not that the carrying amount for a reporting unit is less than its fair value, then subsequent quantitative goodwill impairment testing is not required. If the Company determines that it is more likely than not that the carrying amount for a reporting unit is greater than its fair value, then it proceeds with a subsequent quantitative goodwill impairment test. The Company has the option to bypass the initial qualitative assessment stage and proceed directly to the quantitative goodwill impairment test. The quantitative goodwill impairment test compares each reporting unit’s fair value to its carrying value. If the reporting unit’s fair value exceeds its carrying value, no further procedures are required. However, if a reporting unit’s fair value is less than its carrying value, then an impairment charge is recorded in the amount of the excess . 73 DXC TECHNOLOGY COMPANY - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS When the Company performs the quantitative goodwill impairment test for a reporting unit, it estimates the fair value of the reporting unit using a combination of an income approach and a market approach. The income approach utilizes a discounted cash flow analysis in which the estimated future cash flows and terminal values for each reporting unit are discounted to present value using a discount rate. Cash flow projections are based on management's estimates of economic and market conditions, which drive key assumptions of revenue growth rates, operating margins, capital expenditures and working capital requirements. The discount rate is based on the weighted-average cost of capital and may be adjusted for the relevant risks associated with business-specific characteristics and any uncertainty related to a reporting unit’s ability to execute on the projected future cash flows. The market approach estimates fair value by applying performance-metric multiples to the reporting unit's prior and expected operating performance. The multiples are derived from comparable publicly traded companies that have operating and investment characteristics similar to those of the reporting unit. If the fair value of the reporting unit derived using one approach is significantly different from the fair value estimate using the other approach, the Company reevaluates its assumptions used in the two models. Assumptions are modified as considered appropriate under the circumstances until the two models yield similar and reasonable results. The fair values determined by the market approach and income approach, as described above, are weighted to determine the fair value for each reporting unit. When the Company performs a quantitative goodwill impairment test for its reporting units, it also compares the sum of the reporting units’ fair values to the Company's market capitalization (per-share stock price multiplied by the number of shares outstanding) and calculates an implied control premium representing the excess of the sum of the reporting units’ fair values over the market capitalization. The Company evaluates the reasonableness of the control premium by comparing it to control premiums derived from recent comparable business combinations. If the implied control premium is not supported by market data, the Company adjusts its fair value estimates of the reporting units to a market capitalization supported by relevant market data. Fair Value The Company applies fair value accounting for its financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The objective of a fair value measurement is to estimate the price to sell an asset or transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. Assets and liabilities subject to fair value measurement disclosures are required to be classified according to a three-level fair value hierarchy with respect to the inputs used to determine fair value. The level in which an asset or liability is disclosed within the fair value hierarchy is based on the lowest level input that is significant to the related fair value measurement in its entirety. The levels of input are defined as follows: Level 1: Quoted prices unadjusted for identical assets or liabilities in an active market. Level 2: Quoted prices for similar assets or liabilities in an active market, quoted prices for identical similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. Level 3: Unobservable inputs that reflect the entity's own assumptions which market participants would use in pricing the asset or liability. The fair value of money market funds, money market deposit accounts, U.S. Treasury bills with less than three months maturity and time deposits, included in cash and cash equivalents, are based on quoted market prices. The fair value of other equity securities, included in other long-term assets, is based on actual market prices. The carrying amounts of the Company’s financial instruments with short-term maturities, primarily accounts receivable, accounts payable, short-term debt, and financial liabilities included in other accrued liabilities approximate their market values due to their short-term nature. 74 Non-financial assets such as goodwill, tangible assets, intangible assets, and other contract related long-lived assets are recorded at fair value in the period they are initially recognized; and such fair value may be adjusted in subsequent periods if an event occurs or circumstances change that indicate that the asset may be impaired. The fair value measurements in such instances would be classified as Level 3 within the fair value hierarchy. There were no significant impairments recorded during the fiscal periods covered by this report. Receivables The Company records receivables at their face amounts less an allowance for doubtful accounts. Receivables consist of amounts billed and currently due from customers, amounts earned but unbilled (including contracts measured under the percentage-of-completion cost-to-cost method of accounting), and amounts retained by the customer until the completion of a specified contract and claims. Unbilled receivables amounts under contracts in progress generally become billable upon the passage of time, the achievement of project milestones, or upon acceptance by the customer. Allowances for uncollectible trade receivables are estimated based on a combination of write-off history, aging analysis, any known collectability issues, and certain forward-looking information. DXC uses receivables securitization facilities or receivables sales facilities in the normal course of business as part of managing its cash flows. The Company accounts for receivables sold under these facilities as a sale of financial assets pursuant to ASC 860 “Transfers and Servicing” and derecognizes these receivables, along with the related allowances, from its balance sheets. Generally, the fair value of the sold receivables approximates the book value due to the short-term nature and, as a result, no gain or loss on sale of receivables is recorded. Property and Equipment Property and equipment, which include assets under capital leases, are stated at cost less accumulated depreciation. Depreciation is computed predominantly on a straight-line basis over the estimated useful lives of the assets or the remaining lease term. The estimated useful lives of DXC's property and equipment are as follows: Buildings Up to 40 years Computers and related equipment 4 to 7 years Furniture and other equipment 3 to 15 years Leasehold improvements Shorter of lease term or useful life up to 20 years Intangible Assets The Company's estimated useful lives for finite-lived intangibles are shown in the table below: Software 2 to 10 years Customer related intangibles Expected customer service life Acquired contract related intangibles Contract life and first contract renewal, where applicable Software is amortized using predominately the straight-line method (see Software Development Costs above). Acquired contract related and customer related intangible assets are amortized in proportion to the estimated undiscounted cash flows projected over the estimated life of the asset or on a straight-line basis if such cash flows cannot be reliably estimated. 75 Impairment of Long-Lived Assets and Finite-Lived Intangible Assets Long-lived assets such as property and equipment and finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or group of assets may not be recoverable. Recoverability of long-lived assets or groups of assets is assessed based on a comparison of the carrying amount of such assets to the estimated future net cash flows. If estimated future net cash flows are less than the carrying amount of such assets, an expense is recorded in the amount required to reduce the carrying amount of such assets to fair value. Fair value is determined based on a discounted cash flow approach or, when available and appropriate, comparable market values. Long-lived assets to be disposed of are reported at the lower of their carrying amount or their fair value less costs to sell. Assets/Liabilities Held for Sale The Company classifies assets as held for sale in the period when the following conditions are met: (i) management, having the authority to approve the action, commits to a plan to sell the asset (disposal group); (ii) the asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal group); (iii) an active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated; (iv) the sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset (disposal group) beyond one year; (v) the asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. A long-lived asset (disposal group) that is classified as held for sale is initially measured at the lower of its carrying value or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. Conversely, gains are not recognized on the sale of a long-lived asset (disposal group) until the date of sale. The fair value of a long-lived asset (disposal group) less any costs to sell is assessed each reporting period that it remains classified as held for sale and any subsequent changes are reported as an adjustment to the carrying value of the asset (disposal group), as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale. Income Taxes The Company uses the liability method in accounting for income taxes. Deferred tax assets and liabilities are recorded for the expected future tax consequences of temporary differences between financial statement carrying amounts of assets and liabilities and their respective tax bases, using statutory tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the results of operations in the period that includes the related enactment date. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the Company’s tax provision during the period in which the change occurred. In determining whether a valuation allowance is warranted, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, taxable income in prior carryback years, projected future taxable income, tax planning strategies and recent results of financial operations. The Company recognizes the tax benefit of uncertain tax positions when it is more likely than not that the tax position will be sustained upon examination. Uncertain tax positions are measured based on the probabilities that the uncertain tax position will be realized upon final settlement. All tax-related cash flows resulting from excess tax benefits related to the settlement of share-based awards are classified as cash flows from operating activities and cash paid by directly withholding shares for tax withholding purposes is classified as a financing activity in the statements of cash flows. 76 Cash and Cash Equivalents The Company considers investments with an original maturity of three months or less to be cash equivalents. The Company’s cash equivalents consist of time deposits, money market funds and money market deposit accounts with a number of institutions that have high credit ratings. Foreign Currency The local currency of the Company's foreign affiliates is generally their functional currency. Accordingly, the assets and liabilities of the foreign affiliates are translated from their respective functional currency to U.S. dollars using fiscal year-end exchange rates, income and expense accounts are translated at the average rates in effect during the fiscal year and equity accounts are translated at historical rates. The resulting translation adjustment is reported in the statements of comprehensive income and recorded as part of accumulated other comprehensive loss. Derivative Instruments The Company designates certain derivative instruments as hedges for purposes of hedge accounting, as defined under ASC 815 “Derivatives and Hedging.” For such derivative instruments, the Company documents its risk management objectives and strategy for undertaking hedging transactions, as well as all relationships between hedging and hedged risks. The Company's derivative instruments designated for hedge accounting include interest rate swaps and foreign currency forward and option contracts. Changes in the fair value measurements of these derivative instruments are reflected as adjustments to other comprehensive income (loss) and subsequently reclassified into earnings in the period during which the hedged transactions occurred. Any ineffectiveness or excluded portion of a designated hedge is recognized in earnings. The Company also has entered into certain net investment hedges. Changes in the fair value of net investment hedges are recorded in the currency translation adjustment section of other comprehensive income (loss) and subsequently reclassified into earnings in the period the hedged item affects earnings. The Company excludes forward points from the effectiveness assessment of its net investment hedges. Changes in fair value of the excluded component are recognized in earnings. The derivative instruments not designated as hedges for purposes of hedge accounting include total return swaps and certain short-term foreign currency forward contracts. These instruments are recorded at their respective fair values and the change in their value is reported in current period earnings. The Company does not use derivative instruments for trading or speculative purpose. The Company reports the effective portion of its cash flow hedges in the same financial statement line item as changes in the fair value of the hedged item. All cash flows associated with the Company's derivative instruments are classified as operating activities in the statements of cash flows. 77 Recently Adopted Accounting Pronouncements During fiscal 2025, DXC adopted the following Accounting Standards Updates ("ASU") issued by the Financial Accounting Standards Board: Date Issued and ASU Date Adopted and Method Description Impact November 2023 ASU 2023-07, “Improvements to Reportable Segment Disclosures” January 1, 2025 Prospective This update requires disclosure of significant segment expenses used by the Chief Operating Decision Maker (“CODM”) to assess performance and allocate resources, disclose the title and position of the CODM and modifies other segment disclosures and the frequency thereof. The Company adopted this standard by expanding disclosures related to segments in the notes to the financial statements. New Accounting Pronouncements During fiscal 2024 and fiscal 2025, the following ASUs were issued by the Financial Accounting Standards Board but have not yet been adopted by DXC: Date Issued and ASU DXC Effective Date Description Impact December 2023 ASU 2023-09, “Improvements to Income Tax Disclosures” Fiscal 2026 The update requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. Early adoption of this update is permitted. The Company is in the process of assessing the impacts and method of adoption. This ASU will impact our financial statement disclosures, but not its consolidated financial statements. November 2024 ASU 2024-03, "Disaggregation of Income Statement Expenses" Fiscal 2028 The update requires disclosure, in the notes to financial statements, of specified quantitative information about certain costs and expenses presented in the income statement and certain qualitative information about costs that are not disaggregated. Early adoption of this update is permitted. The Company is in the process of assessing the impacts and method of adoption. This ASU will impact the Company’s financial statement disclosures, but not its consolidated financial statements. Other recently issued ASUs that have not yet been adopted are not expected to have a material effect on DXC's consolidated financial statements. Note 2 - Divestitures Fiscal 2025 Divestitures During fiscal 2025, the Company sold insignificant businesses that resulted in a gain of $ 7 million. Fiscal 2024 Divestitures During fiscal 2024, the Company sold insignificant businesses and made adjustments to estimated amounts from prior years’ dispositions that resulted in a gain of $ 79 million. Fiscal 2023 Divestitures During fiscal 2023, DXC completed the sale of its German financial services subsidiary ("FDB" or the "FDB Business") to the FNZ Group ("FNZ") for € 308 million (approximately $ 329 million), resulting in a pre-tax gain of approximately $ 215 million. Included in the FDB sale was AXA Bank Germany, a German retail bank, that DXC acquired for total consideration of $ 101 million on January 1, 2021. During fiscal 2023, the Company sold insignificant businesses that resulted in a net loss of $ 25 million. Included in this amount was the Company's primary Russian entity that the Company sold in the second quarter of fiscal 2023. 78 Note 3 - Earnings (Loss) Per Share Basic EPS are computed using the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflect the incremental shares issuable upon the assumed exercise of stock options and equity awards. The following table reflects the calculation of basic and diluted EPS: Fiscal Years Ended (in millions, except per-share amounts) March 31, 2025 March 31, 2024 March 31, 2023 Net income (loss) attributable to DXC common shareholders: $ 389 $ 91 $ ( 568 ) Common share information: Weighted average common shares outstanding for basic EPS 180.68 195.80 228.99 Dilutive effect of stock options and equity awards 4.24 2.98 — Weighted average common shares outstanding for diluted EPS 184.92 198.78 228.99 Earnings (loss) per share: Basic $ 2.15 $ 0.46 $ ( 2.48 ) Diluted $ 2.10 $ 0.46 $ ( 2.48 ) Certain share-based equity awards were excluded from the computation of dilutive EPS because inclusion of these awards would have had an anti-dilutive effect. The following table reflects awards excluded: Fiscal Years Ended March 31, 2025 March 31, 2024 March 31, 2023 Stock Options 810,895 953,126 523,969 RSUs 508,620 1,137,403 3,242,461 PSUs 118,704 37,504 3,380,812 79 Note 4 - Receivables Receivables, net of allowance for doubtful accounts consist of the following: As of (in millions) March 31, 2025 March 31, 2024 Billed trade receivables $ 1,331 $ 1,433 Unbilled receivables 1,048 1,124 Other receivables 593 696 Total $ 2,972 $ 3,253 The Company calculates expected credit losses for trade accounts receivable based on historical credit loss rates for each aging category as adjusted for the current market conditions and forecasts about future economic conditions. The following table presents the change in balance for the allowance for doubtful accounts: As of and for Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 Beginning balance $ 35 $ 47 Provisions for losses on accounts receivable 12 — Other adjustments to allowance and write-offs ( 15 ) ( 12 ) Ending balance $ 32 $ 35 Receivables Facility The Company has an accounts receivable sales facility (as amended, restated, supplemented or otherwise modified as of March 31, 2025, the "Receivables Facility") with certain unaffiliated financial institutions (the "Purchasers") for the sale of commercial accounts receivable in the United States. The Receivables Facility has a facility limit of $ 400 million as of March 31, 2025. The Receivables Facility's termination date is July 25, 2025. As of March 31, 2025, the total availability under the Receivables Facility was $ 400 million and the amount sold to the Purchasers was $ 400 million, which was derecognized from the Company's balance sheet. The fair value of the sold receivables approximated their book value due to their short-term nature, resulting in no gain or loss recorded on the sale of receivables. Note 5 - Leases The Company has operating and finance leases for data centers, corporate offices and certain equipment. Our leases have remaining lease terms of one to 10 years, some of which include options to extend the leases for up to 10 years, and some of which include options to terminate the leases within one to three years . 80 Operating Leases The components of operating lease expense were as follows: For the Fiscal Year Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Operating lease cost $ 309 $ 353 $ 404 Short-term lease cost 26 28 35 Variable lease cost 52 61 73 Sublease income ( 17 ) ( 19 ) ( 18 ) Total operating costs $ 370 $ 423 $ 494 Cash payments made for variable lease costs and short-term leases are not included in the measurement of operating lease liabilities, and as such, are excluded from the supplemental cash flow information stated below. For the Fiscal Year Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Cash paid for amounts included in the measurement of operating lease liabilities – operating cash flows $ 309 $ 353 $ 404 ROU assets obtained in exchange for operating lease liabilities (1) $ 241 $ 175 $ 227 (1) There were $ 703 million, $ 880 million, and $ 1,142 million in modifications and terminations in fiscal 2025, 2024, and 2023, respectively. See Note 17 – "Cash Flows” for further information on non-cash activities affecting cash flows. The following table presents operating lease balances: As of (in millions) Balance Sheet Line Item March 31, 2025 March 31, 2024 ROU operating lease assets Operating right-of-use assets, net $ 635 $ 731 Operating lease liabilities Current operating lease liabilities $ 227 $ 282 Operating lease liabilities Non-current operating lease liabilities 444 497 Total operating lease liabilities $ 671 $ 779 The weighted-average operating lease term was 3.8 years and 3.9 years as of March 31, 2025 and March 31, 2024, respectively. The weighted-average operating lease discount rate was 4.9 % and 4.6 % as of March 31, 2025 and March 31, 2024, respectively. The following maturity analysis presents expected undiscounted cash payments for operating leases as of March 31, 2025: Fiscal Year (in millions) 2026 2027 2028 2029 2030 Thereafter Total Operating lease payments $ 251 $ 176 $ 146 $ 95 $ 34 $ 32 $ 734 Less: imputed interest ( 63 ) Total operating lease liabilities $ 671 81 Finance Leases The components of finance lease expense were as follows: For the Fiscal Year Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Finance lease cost: Amortization of right-of-use assets $ 81 $ 137 $ 218 Interest on lease liabilities 14 15 17 Total finance lease cost $ 95 $ 152 $ 235 The following table provides supplemental cash flow information related to the Company’s finance leases: For the Fiscal Year Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Interest paid for finance lease liabilities – Operating cash flows $ 14 $ 15 $ 17 Cash paid for amounts included in the measurement of finance lease obligations – financing cash flows 200 240 315 Total cash paid in the measurement of finance lease obligations $ 214 $ 255 $ 332 Capital expenditures through finance lease obligations (1) $ 24 $ 105 $ 102 (1) See Note 17 – ”Cash Flows” for further information on non-cash activities affecting cash flows. The following table presents finance lease balances: As of (in millions) Balance Sheet Line Item March 31, 2025 March 31, 2024 ROU finance lease assets Property and Equipment, net $ 145 $ 264 Finance lease Short-term debt and current maturities of long-term debt $ 123 $ 178 Finance lease Long-term debt, net of current maturities 155 242 Total finance lease liabilities (1) $ 278 $ 420 (1) See Note 10 – “Debt” for further information on finance lease liabilities. The weighted-average finance lease term was 2.7 years and 2.9 years as of March 31, 2025 and March 31, 2024, respectively. The weighted-average finance lease discount rate was 5.6 % and 4.3 % as of March 31, 2025 and March 31, 2024, respectively. 82 The following maturity analysis presents expected undiscounted cash payments for finance leases as of March 31, 2025: Fiscal Year (in millions) 2026 2027 2028 2029 2030 Thereafter Total Finance lease payments $ 135 $ 92 $ 51 $ 19 $ 1 $ 3 $ 301 Less: imputed interest ( 23 ) Total finance lease liabilities $ 278 Note 6 - Derivative Instruments In the normal course of business, the Company is exposed to interest rate and foreign exchange rate fluctuations. As part of its risk management strategy, the Company uses derivative instruments, primarily foreign currency forward contracts and interest rate swaps, to hedge certain foreign currency and interest rate exposures. The Company’s objective is to reduce earnings volatility by offsetting gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them. The Company does not use derivative instruments for trading or any speculative purposes. Derivatives Designated for Hedge Accounting Cash flow hedges The Company has designated certain foreign currency forward contracts as cash flow hedges to reduce foreign currency risk related to certain Indian Rupee-denominated obligations and forecasted transactions. The notional amounts of foreign currency forward contracts designated as cash flow hedges as of March 31, 2025 and March 31, 2024 were $ 668 million and $ 885 million, respectively. As of March 31, 2025, the related forecasted transactions extend through December 2026. For the fiscal years ended March 31, 2025 and March 31, 2024, respectively, the Company had no cash flow hedges for which it was probable that the hedged transaction would not occur. See Note 15 - “Stockholders' Equity” for changes in accumulated other comprehensive loss, net of taxes, related to the Company’s derivatives designated for hedge accounting. As of March 31, 2025, $ 4 million of loss related to the cash flow hedge reported in accumulated other comprehensive loss is expected to be reclassified into earnings within the next 12 months. Derivatives Not Designated For Hedge Accounting The derivative instruments not designated as hedges for purposes of hedge accounting include certain short-term foreign currency forward contracts. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates. Foreign currency forward contracts The Company manages the exposure to fluctuations in foreign currencies by using foreign currency forward contracts to hedge certain foreign currency denominated assets and liabilities, including intercompany accounts and forecasted transactions. The net notional amounts of the foreign currency forward contracts outstanding as of March 31, 2025 and March 31, 2024 was $ 1.9 billion and $ 1.5 billion, respectively. 83 The following table presents the foreign currency (gain) loss to Other expense (income), net: Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Foreign currency remeasurement (1) $ 3 $ 18 $ 12 Undesignated foreign currency forward contracts (2) ( 7 ) ( 25 ) ( 27 ) Total - Foreign currency gain $ ( 4 ) $ ( 7 ) $ ( 15 ) (1) Movements from exchange rates on the Company’s foreign currency-denominated assets and liabilities. (2) Movements from hedges used to manage the Company’s foreign currency remeasurement exposure, and the associated costs of the hedging program. Fair Value of Derivative Instruments All derivative instruments are recorded at fair value. The Company’s accounting treatment for these derivative instruments is based on its hedge designation. The following tables present the fair values of derivative instruments included in the balance sheets: As of (in millions) Balance Sheet Line Item March 31, 2025 March 31, 2024 Derivatives designated for hedge accounting: Foreign currency forward contracts Other current assets $ 1 $ 6 Accrued expenses and other current liabilities $ 7 $ 3 Derivatives not designated for hedge accounting: Foreign currency forward contracts Other current assets $ 12 $ 16 Accrued expenses and other current liabilities $ 32 $ 12 The fair value of foreign currency forward contracts represents the estimated amount required to settle the contracts using current market exchange rates and is based on the period-end foreign currency exchange rates and forward points that are classified as Level 2 inputs. Other Risks for Derivative Instruments The Company is exposed to the risk of losses in the event of non-performance by the counterparties to its derivative contracts. The amount subject to credit risk related to derivative instruments is generally limited to the amount, if any, by which a counterparty's obligations exceed the obligations of the Company with that counterparty. To mitigate counterparty credit risk, the Company regularly reviews its credit exposure and the creditworthiness of the counterparties. With respect to its foreign currency derivatives, as of March 31, 2025, there were three counterparties with concentration of credit risk, and based on gross fair value, the maximum amount of loss that the Company could incur is immaterial. The Company also enters into enforceable master netting arrangements with some of its counterparties. However, for financial reporting purposes, it is the Company's policy not to offset derivative assets and liabilities despite the existence of enforceable master netting arrangements. The potential effect of such netting arrangements on the Company's balance sheets is not material for the periods presented. Non-Derivative Financial Instruments Designated for Hedge Accounting The Company applies hedge accounting for foreign currency-denominated debt used to manage foreign currency exposures on its net investments in certain non-U.S. operations. To qualify for hedge accounting, the hedging instrument must be highly effective at reducing the risk from the exposure being hedged. 84 Net Investment Hedges DXC seeks to reduce the impact of fluctuations in foreign exchange rates on its net investments in certain non-U.S. operations with foreign currency-denominated debt. For foreign currency denominated debt designated as a hedge, the effectiveness of the hedge is assessed based on changes in spot rates. For qualifying net investment hedges, all gains or losses on the hedging instruments are included in currency translation. Gains or losses on individual net investments in non-U.S. operations are reclassified to earnings from accumulated other comprehensive loss when such net investments are sold or substantially liquidated. As of March 31, 2025 and March 31, 2024, DXC had $ 702 million, respectively, of foreign currency-denominated debt designated as hedges of net investments in non-U.S. subsidiaries. For the fiscal year ended March 31, 2025, the pre-tax impact of loss on foreign currency-denominated debt designated for hedge accounting recognized in other comprehensive income (loss) was immaterial. Note 7 - Property and Equipment Property and equipment consisted of the following: As of (in millions) March 31, 2025 March 31, 2024 Property and equipment — gross: Land, buildings and leasehold improvements $ 1,545 $ 1,917 Computers and related equipment 2,977 3,142 Furniture and other equipment 134 118 Construction in progress 6 9 4,662 5,186 Less: accumulated depreciation 3,409 3,515 Property and equipment, net $ 1,253 $ 1,671 Depreciation expense for fiscal 2025, 2024 and 2023 was $ 351 million, $ 433 million and $ 519 million, respectively. 85 Note 8 - Intangible Assets Intangible assets consisted of the following: As of March 31, 2025 As of March 31, 2024 (in millions) Gross Carrying Value Accumulated Amortization Net Carrying Value Gross Carrying Value Accumulated Amortization Net Carrying Value Software $ 3,713 $ 3,166 $ 547 $ 3,721 $ 3,070 $ 651 Customer related intangible assets 3,886 2,933 953 3,892 2,588 1,304 Other intangible assets 284 142 142 309 134 175 Total intangible assets $ 7,883 $ 6,241 $ 1,642 $ 7,922 $ 5,792 $ 2,130 The components of amortization expense were as follows: Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Intangible asset amortization $ 731 $ 759 $ 796 Transition and transformation contract cost amortization (1) 205 212 204 Total amortization expense $ 936 $ 971 $ 1,000 (1) Transition and transformation contract costs are included within other assets on the balance sheet. Estimated future intangible asset amortization as of March 31, 2025 is as follows: Fiscal Year (in millions) 2026 $ 687 2027 491 2028 215 2029 102 2030 57 Thereafter 90 Total $ 1,642 86 Note 9 - Goodwill The following tables summarize the changes in the carrying amounts of goodwill, by segment, for the fiscal years ended March 31, 2025 and March 31, 2024, respectively: (in millions) GBS GIS Total Balance as of March 31, 2024, net $ 532 $ — $ 532 Divestitures ( 3 ) — ( 3 ) Foreign currency translation ( 3 ) — ( 3 ) Balance as of March 31, 2025, net $ 526 $ — $ 526 Goodwill, gross 5,016 5,066 10,082 Accumulated impairment losses ( 4,490 ) ( 5,066 ) ( 9,556 ) Balance as of March 31, 2025, net $ 526 $ — $ 526 (in millions) GBS GIS Total Balance as of March 31, 2023, net $ 539 $ — $ 539 Divestitures ( 3 ) — ( 3 ) Foreign currency translation ( 4 ) — ( 4 ) Balance as of March 31, 2024, net $ 532 $ — $ 532 Goodwill, gross 5,022 5,066 10,088 Accumulated impairment losses ( 4,490 ) ( 5,066 ) ( 9,556 ) Balance as of March 31, 2024, net $ 532 $ — $ 532 Divestitures are described in Note 2 - "Divestitures." The foreign currency translation amount reflects the impact of currency movements on non-U.S. dollar-denominated goodwill balances. Goodwill Impairment Analyses For the Company’s annual goodwill impairment assessment performed as of July 1, 2024, the Company chose the option to bypass the initial qualitative assessment stage and proceed directly to the quantitative goodwill impairment test; the impairment analyses performed as of July 1, 2023 and 2022 were performed qualitatively. The analyses for each of these fiscal years did not result in an impairment charge. At the end of each fiscal year, the Company assessed whether there were events or changes in circumstances that would more likely than not reduce the fair value of any of its reporting units below its carrying amount and require goodwill to be tested for impairment. The Company determined that there have been no such indicators, and, therefore, it was unnecessary to perform an interim goodwill impairment test as of the end of each respective fiscal year. 87 Note 10 - Debt The following is a summary of the Company's debt: As of (in millions) Interest Rates Fiscal Year Maturities March 31, 2025 (1) March 31, 2024 (1) Short-term debt and current maturities of long-term debt € 650 million Senior notes 1.75 % 2026 $ 702 $ — Current maturities of finance lease liabilities 0.51 % - 14.59 % 2026 123 178 Current maturities of other long-term debt Various 2026 55 93 Short-term debt and current maturities of long-term debt $ 880 $ 271 Long-term debt, net of current maturities € 650 million Senior notes 1.75 % 2026 — 700 $ 700 million Senior notes 1.80 % 2027 698 697 € 750 million Senior notes 0.45 % 2028 808 806 $ 650 million Senior notes 2.375 % 2029 647 646 € 600 million Senior notes 0.95 % 2032 644 643 Finance lease liabilities 0.51 % - 14.59 % 2026 - 2035 155 242 Borrowings for assets acquired under long-term financing 0.00 % - 9.78 % 2026 - 2029 28 84 Other borrowings Various 2026 - 2035 16 — Long-term debt, net of current maturities $ 2,996 $ 3,818 Total debt $ 3,876 $ 4,089 (1) The carrying amounts of the senior notes as of March 31, 2025 and March 31, 2024, include the remaining principal outstanding of $ 3,510 million and $ 3,509 million, respectively, net of total unamortized debt (discounts) and premiums, and deferred debt issuance costs of $ 11 million and $ 17 million, respectively. Fair Value of Debt The estimated fair value of the Company's long-term debt excluding finance lease liabilities was $ 3.3 billion as of both March 31, 2025 and March 31, 2024, respectively, as compared with the carrying value of $ 3.6 billion and $ 3.7 billion as of March 31, 2025 and March 31, 2024, respectively. If measured at fair value, long-term debt excluding finance lease liabilities would be classified as Level 1 or Level 2 within the fair value hierarchy. Future Maturities of Debt Future maturities of debt, excluding finance lease liabilities, for fiscal years after March 31, 2025, are as follows: Fiscal Year (in millions) 2026 $ 757 2027 722 2028 813 2029 653 2030 2 Thereafter 651 Total $ 3,598 88 Note 11 - Revenue Revenue Recognition The following table presents DXC's revenues disaggregated by geography, based on the location of incorporation of the DXC entity providing the related goods or services: Twelve Months Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 United States $ 3,560 $ 3,909 $ 4,320 United Kingdom 1,817 1,881 1,883 Other Europe 4,128 4,267 4,429 Australia 1,145 1,261 1,449 Other International 2,221 2,349 2,349 Total Revenues $ 12,871 $ 13,667 $ 14,430 The revenue by geography pertains to both of the Company’s reportable segments. Refer to Note 19 - "Segment and Geographic Information" for the Company’s segment disclosures. Remaining Performance Obligations Remaining performance obligations represent the aggregate amount of the transaction price in contracts allocated to performance obligations not delivered, or partially undelivered, as of the end of the reporting period. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustments for revenue that has not materialized and adjustments for currency. As of March 31, 2025, approximately $ 16.9 billion of revenue is expected to be recognized from remaining performance obligations. The Company expects to recognize revenue on approximately 39 % of these remaining performance obligations in fiscal 2026, with the remainder of the balance recognized thereafter. Contract Balances The following table provides information about the balances of the Company's trade receivables and contract assets and contract liabilities: As of (in millions) Balance Sheet Line Item March 31, 2025 March 31, 2024 Trade receivables, net Receivables and contract assets, net of allowance for doubtful accounts $ 2,041 $ 2,195 Contract assets Receivables and contract assets, net of allowance for doubtful accounts $ 338 $ 362 Contract liabilities Deferred revenue and advance contract payments and Non-current deferred revenue $ 1,397 $ 1,537 Change in contract liabilities were as follows: (in millions) Twelve Months Ended March 31, 2025 Twelve Months Ended March 31, 2024 Balance, beginning of period $ 1,537 $ 1,842 Deferred revenue 1,727 1,845 Recognition of deferred revenue ( 1,751 ) ( 2,081 ) Currency translation adjustment ( 4 ) ( 3 ) Other ( 112 ) ( 66 ) Balance, end of period $ 1,397 $ 1,537 89 The following tables provides information about the Company’s capitalized costs to obtain and fulfill a contract: As of (in millions) March 31, 2025 March 31, 2024 Capitalized sales commission costs (1) $ 94 $ 89 Transition and transformation contract costs, net (2) $ 668 $ 751 Amortization expense of capitalized sales commission and transition and transformation contract costs were as follows: Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Capitalized sales commission costs amortization (1) $ 47 $ 61 $ 76 Transition and transformation contract cost amortization (2) $ 205 $ 212 $ 204 (1) Capitalized sales commission costs are included within other assets in the accompanying balance sheets and amortization expense related to the capitalized sales commission assets are included in selling, general, and administrative expenses in the accompanying statements of operations. (2) Transition and transformation contract costs, net reflect the Company’s setup costs incurred upon initiation of an outsourcing contract and are included within other assets in the accompanying balance sheets and amortization expense are included within depreciation and amortization in the accompanying statements of operations. 90 Note 12 - Restructuring Costs The Company recorded restructuring costs, net of reversals, of $ 153 million, $ 111 million and $ 216 million for fiscal 2025, 2024 and 2023, respectively. The costs recorded during fiscal 2025 were largely the result of implementing the Fiscal 2025 Plan as described below. The composition of restructuring liabilities by financial statement line items is as follows: As of (in millions) March 31, 2025 March 31, 2024 Accrued expenses and other current liabilities $ 33 $ 40 Other long-term liabilities 6 11 Total $ 39 $ 51 Summary of Restructuring Plans Fiscal 2025 Plan During fiscal 2025, management approved global cost savings initiatives designed to better align the Company’s workforce, facilities and data centers (the “Fiscal 2025 Plan”). Restructuring activities, summarized by plan year, were as follows: Restructuring Liability as of March 31, 2024 Costs Expensed, Net of Reversals Costs Not Affecting Restructuring Liability (1) Cash Paid Other (2) Restructuring Liability as of March 31, 2025 Fiscal 2025 Plan Workforce Reductions $ — $ 95 $ 1 $ ( 70 ) $ — $ 26 Facilities Costs — 35 ( 21 ) ( 13 ) ( 1 ) — — $ 130 ( 20 ) ( 83 ) ( 1 ) 26 Fiscal 2024 Plan Workforce Reductions $ 8 $ — $ — $ ( 7 ) $ ( 1 ) $ — Facilities Costs 2 19 ( 3 ) ( 18 ) — — 10 19 ( 3 ) ( 25 ) ( 1 ) — Other Prior Year and Acquired Plans Workforce Reductions $ 40 $ ( 7 ) $ — $ ( 21 ) $ — $ 12 Facilities Costs 1 11 ( 4 ) ( 8 ) 1 1 41 4 ( 4 ) ( 29 ) 1 13 Total $ 51 $ 153 $ ( 27 ) $ ( 137 ) $ ( 1 ) $ 39 (1) Pension benefit augmentations recorded as pension liabilities, asset impairments and restructuring costs associated with right-of-use assets. (2) Foreign currency translation adjustments. Included in restructuring costs for fiscal 2025 is $ 13 million related to amortization of the right-of-use asset and interest expense for leased facilities that have been vacated but are being actively marketed for sublease or we are in negotiations with the landlord to potentially terminate or modify those leases. 91 Note 13 - Pension and Other Benefit Plans The Company offers a number of pension and OPEB plans, life insurance benefits, deferred compensation and defined contribution plans. Most of the Company's pension plans are not admitting new participants; therefore, changes to pension liabilities are primarily due to market fluctuations of investments for existing participants and changes in interest rates. Defined Benefit Plans The Company sponsors a number of defined benefit and post-retirement medical benefit plans for the benefit of eligible employees. The benefit obligations of the Company's U.S. pension, U.S. OPEB, and non-U.S. OPEB plans represent an insignificant portion of the Company's pension and other post-retirement benefit plans. As a result, the disclosures below include the Company's U.S. and non-U.S. pension and OPEB plans on a global consolidated basis. Eligible employees are enrolled in defined benefit pension plans in their country of domicile. The defined benefit pension plans in the U.K. represents the largest plans. In addition, healthcare, dental and life insurance benefits are also provided to certain non-U.S. employees. A significant number of employees outside the United States are covered by government sponsored programs at no direct cost to the Company other than related payroll taxes. During fiscal 2023, pension trustees and the Company took actions to reduce the volatility of a defined benefit pension plan in the U.K., including entering into pension risk transfer transactions involving the purchase of annuity contracts for portions of its outstanding defined benefit pension obligations using assets from the pension trust. In connection with this transaction, the pension trustees transferred $ 1.0 billion of gross defined benefit pension obligations and related plan assets to an insurance company for approximately 5,000 U.K. plan participants. In addition, the Company recognized a noncash pension settlement charge of $ 361 million, which includes the accelerated recognition of prior service credit that was included in accumulated other comprehensive loss. This transaction is irrevocable, and as a result of the transaction, the pension trustees and the Company were relieved of all responsibility for the related pension obligations and the insurance company is now required to pay and administer the retirement benefits. The change in projected benefit obligation for fiscal year 2025 is primarily related to interest cost, benefits paid, and actuarial gains. Actuarial gains were primarily due to discount rate increases in the U.K. Projected Benefit Obligations As of (in millions) March 31, 2025 March 31, 2024 Projected benefit obligation at beginning of year $ 6,915 $ 6,937 Service cost 52 53 Interest cost 300 307 Plan participants’ contributions 7 21 Amendments 13 6 Business/contract acquisitions/divestitures — 4 Settlement/curtailment ( 23 ) ( 268 ) Actuarial (gain) loss ( 908 ) 67 Benefits paid ( 286 ) ( 292 ) Foreign currency exchange rate changes 91 98 Other ( 17 ) ( 18 ) Projected benefit obligation at end of year $ 6,144 $ 6,915 92 The following table summarizes the weighted average rates used in the determination of the Company’s benefit obligations: Fiscal Years Ended March 31, 2025 March 31, 2024 Discount rate 5.1 % 4.4 % Rates of increase in compensation levels 2.2 % 2.4 % Interest Crediting Rate 3.3 % 2.7 % Fair Value of Plan Assets and Funded Status As of (in millions) March 31, 2025 March 31, 2024 Fair value of plan assets at beginning of year $ 7,318 $ 7,636 Actual return on plan assets ( 229 ) 67 Employer contribution 15 49 Plan participants’ contributions 7 21 Benefits paid ( 286 ) ( 292 ) Contractual termination benefits — 1 Plan settlement ( 21 ) ( 265 ) Foreign currency exchange rate changes 108 118 Other ( 17 ) ( 17 ) Fair value of plan assets at end of year $ 6,895 $ 7,318 Funded status at end of year $ 751 $ 403 Selected Information As of (in millions) March 31, 2025 March 31, 2024 Other assets $ 1,181 $ 874 Accrued expenses and other current liabilities ( 30 ) ( 34 ) Non-current pension obligations ( 387 ) ( 423 ) Other long-term liabilities - OPEB ( 13 ) ( 14 ) Net amount recorded $ 751 $ 403 Accumulated benefit obligation $ 6,084 $ 6,842 Benefit Plans with Projected Benefit Obligation in Excess of Plan Assets Benefit Plans with Accumulated Benefit Obligation in Excess of Plan Assets (in millions) March 31, 2025 March 31, 2024 March 31, 2025 March 31, 2024 Projected benefit obligation $ 1,048 $ 1,113 $ 741 $ 777 Accumulated benefit obligation $ 994 $ 1,047 $ 708 $ 744 Fair value of plan assets $ 617 $ 646 $ 324 $ 327 93 Net Periodic Pension Cost Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Service cost $ 52 $ 53 $ 73 Interest cost 300 307 254 Expected return on assets ( 455 ) ( 446 ) ( 498 ) Amortization of prior service credit ( 5 ) ( 6 ) ( 7 ) Subtotal ( 108 ) ( 92 ) ( 178 ) Settlement/curtailment (gain) loss — ( 2 ) 361 Recognition of actuarial (gain) loss ( 232 ) 447 1,070 Net periodic pension (income) expense $ ( 340 ) $ 353 $ 1,253 The service cost component of net periodic pension (income) expense is presented in costs of services and selling, general and administrative and the other components of net periodic pension (income) expense are presented in other (income) expense, net in the Company’s statements of operations. The weighted-average rates used to determine net periodic pension cost were: Fiscal Years Ended March 31, 2025 March 31, 2024 March 31, 2023 Discount or settlement rates 4.4 % 4.5 % 2.7 % Expected long-term rates of return on assets 6.3 % 6.0 % 4.3 % Rates of increase in compensation levels 2.4 % 2.8 % 2.9 % Interest Crediting Rate 2.7 % 4.5 % 4.0 % The following is a summary of amounts in accumulated other comprehensive loss, before tax effects: Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 Prior service credit $ ( 158 ) $ ( 176 ) Estimated Future Contributions and Benefits Payments (in millions) Employer contributions: 2026 $ 34 Benefit Payments: 2026 $ 337 2027 340 2028 353 2029 361 2030 371 2031 and thereafter 1,982 Total $ 3,744 94 Fair Value of Plan Assets The tables below set forth the fair value of plan assets by asset category within the fair value hierarchy: As of March 31, 2025 (in millions) Level 1 Level 2 Level 3 Total Equity: Global/International Equity commingled funds $ 21 $ 652 $ — $ 673 U.S./North American Equity commingled funds 5 — — 5 Fixed Income: Non-U.S. Government funds 3 76 — 79 Fixed income commingled funds 38 323 — 361 Corporate and other bonds 1 3,145 — 3,146 Alternatives: Other Alternatives (1) — 783 1,480 2,263 Hedge Funds (2) — — 37 37 Other Assets — 19 77 96 Insurance contracts — 111 — 111 Cash and cash equivalents 112 12 — 124 Totals $ 180 $ 5,121 $ 1,594 $ 6,895 As of March 31, 2024 (in millions) Level 1 Level 2 Level 3 Total Equity: Global/International Equity commingled funds $ 21 $ 662 $ — $ 683 U.S./North American Equity commingled funds 5 — — 5 Fixed Income: Non-U.S. Government funds — 29 — 29 Fixed income commingled funds 1 205 12 218 Fixed income mutual funds — — — — Corporate and other bonds — 3,678 91 3,769 Alternatives: Other Alternatives (1) — 943 1,018 1,961 Hedge Funds (2) — 8 48 56 Other Assets 28 26 60 114 Insurance contracts — 91 — 91 Cash and cash equivalents 347 45 — 392 Totals $ 402 $ 5,687 $ 1,229 $ 7,318 (1) Represents real estate and other commingled funds consisting mainly of equities, bonds, or commodities. (2) Represents investments in diversified fund of hedge funds. 95 Changes in fair value measurements of level 3 investments for the defined benefit plans were as follows: (in millions) Balance as of March 31, 2023 $ 1,201 Actual return on plan assets held at the reporting date 14 Purchases, sales and settlements ( 18 ) Changes due to exchange rates 32 Balance as of March 31, 2024 1,229 Actual return on plan assets held at the reporting date 97 Purchases, sales and settlements 279 Transfers in and / or out of Level 3 ( 35 ) Changes due to exchange rates 24 Balance as of March 31, 2025 $ 1,594 Domestic and global equity accounts are categorized as Level 1 if the securities trade on national or international exchanges and are valued at their last reported closing price. Equity assets in commingled funds reporting a net asset value are categorized as Level 2 and valued using broker dealer bids or quotes of securities with similar characteristics. Fixed income accounts are categorized as Level 1 if traded on a publicly quoted exchange or as level 2 if investments in corporate bonds are primarily investment grade bonds, generally priced using model-based pricing methods that use observable market data as inputs. Broker dealer bids or quotes of securities with similar characteristics may also be used. Alternative investment fund securities are categorized as Level 1 if held in a mutual fund or in a separate account structure and actively traded through a recognized exchange, or as Level 2 if they are held in commingled or collective account structures and are actively traded. Alternative investment fund securities are classified as Level 3 if they are held in Limited Company or Limited Partnership structures or cannot otherwise be classified as Level 1 or Level 2. Other assets represent property holdings by certain pension plans. As above, the property holdings represent a master lease arrangement entered into by DXC in the U.K. and certain U.K. pension plans as a financing transaction. Insurance contracts purchased to cover benefits payable to retirees are valued using the assumptions used to value the projected benefit obligation. Cash equivalents that have quoted prices in active markets are classified as Level 1. Short-term money market commingled funds are categorized as Level 2 and valued at cost plus accrued interest which approximates fair value. Plan Asset Allocations As of Asset Category March 31, 2025 March 31, 2024 Equity securities 10 % 9 % Debt securities 52 % 55 % Alternatives 35 % 29 % Cash and other 3 % 7 % Total 100 % 100 % Plan assets are held in a trust that includes commingled funds subject to country specific regulations and invested primarily in commingled funds. For the U.K. pension plans, the Company's largest pension plans by assets and projected liabilities, a target allocation by asset class was developed to achieve their long-term objectives. Asset allocations are monitored closely and investment reviews regarding asset strategy are conducted regularly with internal and external advisors. 96 The Company’s investment goals and risk management strategy for plan assets evaluates a number of factors, including the time horizon of the plans’ obligations. Plan assets are invested in various asset classes that are expected to produce a sufficient level of diversification in order to reduce risk, yet produces a reasonable amount of return on investment over the long term. Sufficient liquidity is maintained to meet benefit obligations as they become due. Third party investment managers are employed to invest assets in both passively-indexed and actively-managed strategies. Equities are primarily invested broadly in domestic and foreign companies across market capitalizations and industries. Fixed income securities are invested broadly, primarily in government treasury, corporate credit, mortgage backed and asset backed investments. Alternative investment allocations are included in selected plans to achieve greater portfolio diversity intended to reduce the overall volatility risk of the plans. Plan asset risks include longevity, inflation, and other changes in market conditions that could reduce the value of plan assets. Also, a decline in the yield of high quality corporate bonds may adversely affect discount rates resulting in an increase in DXC's pension and other post-retirement obligations. These risks, among others, could cause the plans’ funded status to deteriorate, resulting in an increased reliance on Company contributions. Derivatives are permitted although their current use is limited within traditional funds and broadly allowed within alternative funds. Derivatives are used for inflation risk management and within the liability driven investing strategy. The Company also has investments in insurance contracts to pay plan benefits in certain countries. Return on Assets The Company consults with internal and external advisors regarding the expected long-term rate of return on assets. The Company uses various sources in its approach to compute the expected long-term rate of return of the major asset classes expected in each of the plans. DXC utilizes long-term, asset class return assumptions of typically 30 years, which are provided by external advisors. Consideration is also given to the extent active management is employed in each asset class and also to management expenses. A single expected long-term rate of return is calculated for each plan by assessing the plan's expected asset allocation strategy, the benefits of diversification therefrom, historical excess returns from actively managed traditional investments, expected long-term returns for alternative investments and expected investment expenses. The resulting composite rate of return is reviewed by internal and external parties for reasonableness. Retirement Plan Discount Rate The U.K. discount rate is based on the yield curve approach using the U.K. Aon GBP Single Agency AA Corporates-Only Curve. Defined Contribution Plans The Company sponsors defined contribution plans for substantially all U.S. employees and certain foreign employees. For certain plans, the Company will match employee contributions. The plans allow employees to contribute a portion of their earnings in accordance with specified guidelines. During fiscal 2025, 2024 and 2023, the Company contributed $ 191 million, $ 188 million and $ 203 million, respectively, to its defined contribution plans. As of March 31, 2025, plan assets included 2,069,090 shares of the Company’s common stock. Deferred Compensation Plans DXC sponsors two Deferred Compensation Plans, the “DXC Technology Company Deferred Compensation Plan” (the “DXC DCP”), and the Enterprise Services Executive Deferred Compensation Plan (the “ES DCP”). Both plans are non-qualified deferred compensation plans maintained for a select group of management, highly compensated employees and non-employee directors. The DXC DCP covers eligible employees who participated in CSC’s Deferred Compensation Plan prior to the HPES Merger. The ES DCP covers eligible employees who participated in the HPE Executive Deferred Compensation Plan prior to the HPES Merger. Both plans allow participating employees to defer the receipt of current compensation to a future distribution date or event above the amounts that may be deferred under DXC’s tax-qualified 401(k) plan, the DXC 97 Technology Matched Asset Plan. Neither plan provides for employer contributions. As of April 3, 2017, the ES DCP does not admit new participants. Certain management and highly compensated employees are eligible to defer all, or a portion of, their regular salary that exceeds the limitation set forth in Internal Revenue Section 401(a)(17) and all or a portion of their incentive compensation. Non-employee directors are eligible to defer up to 100 % of their cash compensation. The liability under the plan, which is included in other long-term liabilities in the Company's balance sheets, amounted to $ 28 million as of March 31, 2025 and $ 31 million as of March 31, 2024. The Company's expense under the Plan totaled $ 2 million and $ 5 million for fiscal 2025 and 2024, respectively. Note 14 - Income Taxes The sources of income (loss) from continuing operations, before income taxes, classified between domestic entities and those entities domiciled outside of the United States, are as follows: Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Domestic entities $ ( 84 ) $ 53 $ ( 206 ) Entities outside the United States 714 56 ( 679 ) Total $ 630 $ 109 $ ( 885 ) The income tax expense (benefit) on income (loss) from continuing operations is comprised of: Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Current: Federal $ 104 $ 94 $ 96 State ( 14 ) 57 39 Foreign 179 288 155 269 439 290 Deferred: Federal ( 102 ) ( 186 ) ( 192 ) State ( 28 ) ( 38 ) ( 47 ) Foreign 95 ( 192 ) ( 370 ) ( 35 ) ( 416 ) ( 609 ) Total income tax expense (benefit) $ 234 $ 23 $ ( 319 ) The current federal tax expense and (benefit) for fiscal years 2025, 2024, and 2023 includes a $ 0 million, $( 21 ) million and $( 61 ) million transition tax benefit, respectively. The current expense (benefit) for fiscal years 2025, 2024, and 2023, includes interest and penalties of $ 14 million, $ 10 million and $ 1 million, respectively, for uncertain tax positions. In connection with the HPES Merger, the Company entered into a tax matters agreement with HPE. HPE generally will be responsible for tax liabilities arising prior to the HPES Merger, and DXC is liable to HPE for income tax receivables it receives related to pre-HPES Merger periods. Pursuant to the tax matters agreement, the Company recorded a $ 15 million tax indemnification receivable related to uncertain tax positions, a $ 38 million tax indemnification receivable related to other tax payables, and a $ 92 million tax indemnification payable related to other tax receivables. In connection with the USPS Separation, the Company entered into a tax matters agreement with Perspecta Inc. (including its successors and permitted assigns, "Perspecta"). The Company generally will be responsible for tax liabilities arising prior to the USPS Separation, and Perspecta is liable to the Company for income tax receivables related to pre-spin-off periods. Income tax liabilities transferred to Perspecta primarily relate to pre-HPES Merger periods, for which the Company is indemnified by HPE pursuant to the tax matters agreement between the Company and HPE. The Company 98 remains liable to HPE for tax receivables transferred to Perspecta related to pre-HPES Merger periods. Pursuant to the tax matters agreement, the Company recorded a $ 15 million tax indemnification receivable from Perspecta related to other tax receivables and a $ 4 million tax indemnification payable to Perspecta related to income tax and other tax payables. In connection with the sale of its healthcare provider software business ("HPS"), the Company entered into a tax matters agreement with Dedalus. Pursuant to the tax matters agreement, the Company generally will be responsible for tax liabilities arising prior to the sale of the HPS business. The major elements contributing to the difference between the U.S. federal statutory tax rate and the effective tax rate ("ETR") for continuing operations is below. Fiscal Years Ended March 31, 2025 March 31, 2024 March 31, 2023 Statutory rate 21.0 % 21.0 % ( 21.0 ) % State income tax, net of federal tax 0.3 3.7 ( 1.4 ) Foreign tax rate differential 23.0 ( 152.3 ) ( 2.3 ) Change in valuation allowances ( 3.5 ) 146.8 ( 1.3 ) Income tax and foreign tax credits ( 13.3 ) ( 92.7 ) ( 8.0 ) Change in uncertain tax positions ( 8.3 ) — 1.2 Withholding taxes 2.1 58.7 3.5 U.S. tax on foreign income 9.4 35.8 5.8 Excess tax benefit or expense for stock compensation 1.1 ( 0.9 ) 0.6 Capitalized transaction costs — 0.9 0.2 Base erosion and transition taxes 0.3 ( 26.6 ) ( 9.1 ) Impact of business divestitures 0.2 ( 5.5 ) ( 7.6 ) Indemnification costs 0.5 3.7 1.2 Interest on tax receivables ( 2.5 ) — — Tax audits 1.9 22.0 — Other items, net 4.9 6.5 2.2 Effective tax rate 37.1 % 21.1 % ( 36.0 ) % In fiscal 2025, the ETR was primarily impacted by: • The global mix of income and changes in foreign statutory tax rates, which increased the foreign tax rate differential and the ETR by $ 145 million and 23.0 %, respectively. • Income tax and foreign tax credits, which decreased income tax expense and the ETR by $ 84 million and 13.3 %, respectively, offset by tax expense on U.S. international tax inclusions, which increased tax expense and the ETR by $ 59 million and 9.4 %, respectively. • The tax benefit of changes in uncertain tax positions related to the expiration of the statute of limitations and capitalized research and experimental expenditures, offset by the impact of increases in other uncertain tax positions and accrued interest, which decreased income tax expense and the ETR by $ 52 million and 8.3 %, respectively. In fiscal 2024, the ETR was primarily impacted by: • Changes in foreign jurisdictional losses that decreased the ETR by $ 160 million and 146.8 %, respectively, with an offsetting increase in the ETR due to an increase in the valuation allowance of the same amount. • Income tax and foreign tax credits, which decreased income tax expense and decreased the ETR by $ 101 million and 92.7 %, respectively, offset by tax expense on U.S. international tax inclusions, which increased tax expense and increased the ETR by $ 39 million and 35.8 %, respectively. 99 • Foreign withholding taxes, which increased income tax expense and increased the ETR by $ 64 million and 58.7 %, respectively. In fiscal 2023, the ETR was primarily impacted by: • A reduction in base erosion and transition taxes, which increased income tax benefit and decreased the ETR by $ 81 million and 9.1 %, respectively. • Income tax and foreign tax credits, which increased income tax benefit and decreased the ETR by $ 71 million and 8.0 %, respectively, offset by tax expense on U.S. international tax inclusions which decreased tax benefit and increased the ETR by $ 51 million and 5.8 %, respectively. • Non-taxable gains and losses on business divestitures, which increased income tax benefit and decreased the ETR by $ 67 million and 7.6 %, respectively. The deferred tax assets (liabilities) were as follows: As of (in millions) March 31, 2025 March 31, 2024 Deferred tax assets Tax loss/credit carryforwards 2,477 2,535 Accrued interest 19 24 Operating lease liabilities 132 172 Contract accounting 122 127 Depreciation and amortization 252 129 Other assets 310 298 Total deferred tax assets 3,312 3,285 Valuation allowance ( 2,242 ) ( 2,264 ) Net deferred tax assets 1,070 1,021 Deferred tax liabilities Operating right-of-use asset ( 127 ) ( 161 ) Investment basis differences ( 10 ) ( 13 ) Employee benefits ( 82 ) ( 7 ) Other liabilities ( 133 ) ( 166 ) Total deferred tax liabilities ( 352 ) ( 347 ) Total net deferred tax assets (liabilities) $ 718 $ 674 100 Income tax related assets are included in the accompanying balance sheets as follows: As of (in millions) March 31, 2025 March 31, 2024 Current: Income tax receivables and prepaid taxes $ 43 $ 44 $ 43 $ 44 Non-current: Income taxes receivable and prepaid taxes $ 264 $ 258 Deferred tax assets 819 804 $ 1,083 $ 1,062 Total $ 1,126 $ 1,106 Income tax related liabilities are included in the accompanying balance sheet as follows: As of (in millions) March 31, 2025 March 31, 2024 Current: Income taxes payable $ ( 64 ) $ ( 134 ) $ ( 64 ) $ ( 134 ) Non-current: Deferred taxes $ ( 101 ) $ ( 130 ) Income taxes payable ( 55 ) ( 32 ) Liability for uncertain tax positions ( 339 ) ( 394 ) $ ( 495 ) $ ( 556 ) Total $ ( 559 ) $ ( 690 ) Significant management judgment is required in determining the Company's provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. As of each reporting date, management weighs new evidence, both positive and negative, that could affect its view of the future realization of its net deferred tax assets. Objective verifiable evidence, which is historical in nature, carries more weight than subjective evidence, which is forward looking in nature. A valuation allowance has been recorded against deferred tax assets of approximately $ 2,242 million as of March 31, 2025, due to uncertainties related to the ability to utilize these assets. In assessing whether its deferred tax assets are realizable, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized and adjusts the valuation allowance accordingly. The Company considers all available positive and negative evidence including future reversals of existing taxable temporary differences, taxable income in prior carryback years, projected future taxable income, tax planning strategies and recent financial operations. The net decrease in the valuation allowance of $ 22 million in fiscal 2025 was primarily due to statutory corporate income tax rate changes which triggered a remeasurement of deferred tax balances and the associated valuation allowances. 101 The following table provides information on the Company's various tax carryforwards: As of March 31, 2025 As of March 31, 2024 (in millions) Total With No Expiration With Expiration Expiration Dates Through Total With No Expiration With Expiration Expiration Dates Through Net operating loss carryforwards Federal $ — $ — $ — N/A $ 62 $ 62 $ — N/A State $ 332 $ 161 $ 171 2045 $ 387 $ 191 $ 196 2044 Foreign $ 10,369 $ 5,402 $ 4,967 2042 $ 10,211 $ 5,359 $ 4,852 2041 Tax credit carryforwards Federal $ — $ — $ — 0 $ 3 $ — $ 3 2044 State $ 5 $ — $ 5 2040 $ 5 $ — $ 5 2034 Foreign $ 2 $ — $ 2 2038 $ 2 $ — $ 2 2037 Capital loss carryforwards Federal $ 42 $ 42 $ — N/A $ 42 $ 42 $ — N/A State $ 47 $ 47 $ — N/A $ 46 $ 46 $ — N/A Foreign $ 34 $ 34 $ — N/A $ 30 $ 30 $ — N/A The Company also has federal and state 163(j) interest deduction carryforward attributes of approximately $ 25 million and $ 1,230 million, respectively, that have no expiration. As of March 31, 2025, the Company had undistributed earnings from foreign subsidiaries that were not indefinitely reinvested and had a deferred tax liability of $ 32 million for the estimated taxes associated with the repatriation of these earnings. The Company also had undistributed earnings of approximately $ 1.4 billion and other outside basis differences in foreign subsidiaries that were indefinitely reinvested in foreign operations. No taxes have been provided on the undistributed foreign earnings and outside basis differences that are indefinitely reinvested. If future events, including material changes in estimates of cash, working capital and long-term investment requirements, necessitate that these earnings be distributed, an additional provision for taxes may apply, which could materially affect our future effective tax rate. The Company accounts for income tax uncertainties in accordance with ASC 740 Income Taxes, which prescribes a recognition threshold and measurement criteria for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more likely than not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. ASC 740 also provides guidance on the accounting for and disclosure of liabilities for uncertain tax positions, interest and penalties. 102 In accordance with ASC 740, the Company’s liability for uncertain tax positions was as follows: Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 Tax $ 291 $ 361 Interest 117 103 Penalties 3 4 Reduction of receivables ( 71 ) ( 72 ) Net of tax attributes ( 1 ) ( 2 ) Total $ 339 $ 394 The following table summarizes the activity related to the Company’s uncertain tax positions (excluding interest and penalties and related tax attributes): Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Balance at beginning of fiscal year $ 361 $ 399 $ 422 Gross increases related to prior year tax positions 37 14 31 Gross decreases related to prior year tax positions ( 54 ) ( 55 ) ( 17 ) Gross increases related to current year tax positions 15 8 8 Gross decreases related to current year tax positions ( 12 ) — — Settlements and statute of limitation expirations ( 55 ) ( 5 ) ( 43 ) Foreign exchange and others ( 1 ) — ( 2 ) Balance at end of fiscal year $ 291 $ 361 $ 399 The Company’s liability for uncertain tax positions at March 31, 2025, March 31, 2024, and March 31, 2023, includes $ 336 million, $ 365 million and $ 368 million, respectively, related to amounts that, if recognized, would affect the effective tax rate (excluding related interest and penalties). The decrease in tax positions is primarily due to statute of limitation expirations and a change in the uncertain tax position related to capitalized research and experimental expenditures. The Company recognizes interest accrued related to uncertain tax positions and penalties as a component of income tax expense. During the year ended March 31, 2025, the Company had a net increase in interest expense of $ 14 million ($ 11 million net of tax), no changes in accrued expense for penalties and, as of March 31, 2025, recognized a liability for interest of $ 117 million ($ 89 million net of tax) and penalties of $ 3 million. During the year ended March 31, 2024, the Company had a net increase in interest expense of $ 24 million ($ 18 million net of tax) and a net decrease in accrued expense for penalties of $ 14 million and, as of March 31, 2024, recognized a liability for interest of $ 103 million ($ 79 million net of tax) and penalties of $ 4 million. During the year ended March 31, 2023, the Company had a net increase in interest expense of $ 3 million ($ 1 million net of tax) and a net decrease in accrued expense for penalties of $ 2 million and, as of March 31, 2023, recognized a liability for interest of $ 79 million ($ 61 million net of tax) and penalties of $ 18 million. 103 The Company is currently under examination in several tax jurisdictions. A summary of the tax years that remain subject to examination in certain of the Company’s major tax jurisdictions are: Jurisdiction: Tax Years that Remain Subject to Examination (Fiscal Year Ending): Australia 2021 and forward United States – Federal 2009 and forward United States – Various States 2009 and forward Canada 2010 and forward France 2019 and forward Germany 2010 and forward India 2001 and forward United Kingdom 2018 and forward Tax Examinations The Internal Revenue Service (the “IRS”) has examined, or is examining, the Company’s federal income tax returns for fiscal years 2009 through the tax year ended October 31, 2018. With respect to CSC’s fiscal years 2009 through 2017 federal tax returns, the Company participated in settlement negotiations with the IRS Office of Appeals. The IRS examined several issues for these tax years that resulted in various audit adjustments. The Company and the IRS Office of Appeals have settled various audit adjustments, and we disagree with the IRS’ disallowance of certain losses and deductions resulting from restructuring costs, foreign exchange losses, and a third-party financing transaction in previous years. We have received notices of deficiency and a final partnership administrative adjustment with respect to fiscal years 2009, 2010, 2011 and 2013 and have timely filed petitions with the U.S. Tax Court. The U.S. Tax Court cases generally involve three primary issues. The first issue pertains to a capital loss the Company claimed in fiscal year 2013 in the amount of $ 651 million, which the IRS subsequently disallowed, and for which it proposed a substantial understatement penalty. The total cash tax payment the IRS is seeking is approximately $ 469 million, inclusive of penalties and interest, which continues to accrue. The matter is currently scheduled for trial in August 2025. The second issue pertains to the Company’s deduction for restructuring expenses in fiscal year 2013 in the amount of $ 146 million, which the IRS has disputed. The total cash tax payment the IRS is seeking is approximately $ 101 million, inclusive of penalties and interest, which continues to accrue. In January 2025, the Court denied the IRS’s motion for summary judgment. A trial date is pending. The third issue primarily pertains to foreign currency losses from 2009 that the Company claimed in fiscal years 2010 and 2011 in the amount of $ 165 million, resulting from the depreciation of the U.S. dollar against the Euro over an eight-year period (from 2001 to 2009) upon termination of a partnership interest involving two entities with different functional currencies. The total cash tax payment the IRS is seeking is approximately $ 124 million, inclusive of penalties and interest, which continues to accrue. This matter is currently pending a summary judgment motion from the IRS. As we believe we will ultimately prevail on the technical merits of the disagreed items and are challenging them in the U.S. Tax Court, the above matters are not fully reserved and would result in incremental federal and state tax expense of approximately $ 544 million (including estimated interest and penalties) for the unreserved portion of these items and cash tax payments of approximately $ 623 million if we do not prevail. These amounts are net of an expected $ 71 million interest deduction tax benefit. During fiscal 2024, the Company determined there were inadvertent omissions on previously filed tax returns related to gain recognition agreements and certain related tax forms and disclosures. The Company notified the IRS promptly and filed for relief under Treas. Reg. Sec. 1.367(a)-8(p) to correct the issue. 104 The Company’s fiscal years 2009, 2010, and 2013 are in the U.S. Tax Court, and consequently these years will remain open until such proceedings have concluded. The Company has agreed to extend the statute of limitations for fiscal and tax return years 2014 through 2021 to December 31, 2025. The Company expects to reach resolution for fiscal and tax return years 2009 through 2011 no earlier than fiscal year 2026. The Company expects to reach resolution for fiscal and tax return years 2012 and 2013 no earlier than fiscal year 2028. The Company expects to reach resolution for fiscal and tax return years 2014 through 2021 no earlier than fiscal year 2026. The Company may settle certain other tax examinations for different amounts than the Company has accrued as uncertain tax positions. Consequently, the Company may need to accrue and ultimately pay additional amounts or pay lower amounts than previously estimated and accrued when positions are settled in the future. The Company believes the outcomes that are reasonably possible within the next 12 months to result in a reduction in its liability for uncertain tax positions, excluding interest, penalties, and tax carryforwards, would be approximately $ 2 million. 105 Note 15 - Stockholders' Equity Description of Capital Stock The Company has authorized share capital consisting of 750,000,000 shares of common stock, par value $ 0.01 per share, and 1,000,000 shares of preferred stock, par value $ 0.01 per share. Each share of common stock is equal in all respects to every other share of common stock of the Company. Each share of common stock is entitled to one vote per share at each annual or special meeting of stockholders for the election of directors and upon any other matter coming before such meeting. Subject to all the rights of the preferred stock, dividends may be paid to holders of common stock as and when declared by the Board of Directors (the "Board"). The Company's charter requires that preferred stock must be all of one class but may be issued from time to time in one or more series, each of such series to have such full or limited voting powers, if any, and such designations, preferences and relative, participating, optional or other special rights or qualifications, limitations or restrictions as provided in a resolution adopted by the Board. Each share of preferred stock will rank on a parity with each other share of preferred stock, regardless of series, with respect to the payment of dividends at the respectively designated rates and with respect to the distribution of capital assets according to the amounts to which the shares of the respective series are entitled. Share Repurchase Program On April 3, 2017, DXC announced the establishment of a share repurchase program approved by the Board with an initial authorization of $ 2.0 billion for future repurchases of outstanding shares of DXC common stock. On November 8, 2018, DXC announced that its Board approved an incremental $ 2.0 billion share repurchase authorization. During fiscal 2024, DXC completed the remaining share repurchases under the above authorizations. On May 18, 2023, DXC announced that its Board approved an incremental $ 1.0 billion share repurchase authorization. Share repurchases may be made from time to time through various means, including in open market purchases, 10b5-1 plans, privately-negotiated transactions, accelerated stock repurchases, block trades and other transactions, in compliance with Rule 10b-18 under the Exchange Act of 1934, as amended, as well as, to the extent applicable, other federal and state securities laws and other legal requirements. The timing, volume, and nature of share repurchases pursuant to the share repurchase plan are at the discretion of management and may be suspended or discontinued at any time. As of March 31, 2025, approximately $ 592 million worth of shares remained available for repurchase under the plans or programs. There were no share repurchases during fiscal 2025. During the third quarter of fiscal 2025, the Company made a $ 12 million payment for the excise tax associated with prior year share repurchases in compliance with the Inflation Reduction Act. The shares repurchased are retired immediately and included in the category of authorized but unissued shares. The excess of purchase price over par value of the common shares is allocated between additional paid-in capital and retained earnings. The details of shares repurchased during fiscal 2024 and 2023 are shown below: Fiscal Year Number of shares repurchased Average Price Per Share Amount (In millions) 2024 Open market purchases 38,444,830 $ 22.98 $ 883 2024 Total 38,444,830 $ 22.98 $ 883 2023 Open market purchases 24,436,738 $ 27.78 $ 679 2023 Total 24,436,738 $ 27.78 $ 679 106 Treasury Stock Transactions In fiscal 2025, 2024 and 2023, the Company accepted 1,062,326 , 1,257,748 and 455,513 shares of its common stock, respectively, in lieu of cash in connection with the tax withholdings associated with the release of common stock upon vesting of restricted stock and RSUs. As a result, the Company holds 5,653,666 treasury shares as of March 31, 2025. Dividends The Board suspended the Company’s cash dividend payment beginning in the first quarter of fiscal 2021 to preserve cash and enhance financial flexibility in the current environment. As of March 31, 2025, the Company does not intend to reinstate its quarterly cash dividends. Accumulated Other Comprehensive Loss The following table shows the changes in accumulated other comprehensive loss, net of taxes: (in millions) Foreign Currency Translation Adjustments Cash Flow Hedges Pension and Other Post-retirement Benefit Plans Accumulated Other Comprehensive Loss Balance at March 31, 2022 $ ( 651 ) $ 10 $ 256 $ ( 385 ) Current-period other comprehensive (loss) income ( 334 ) ( 6 ) — ( 340 ) Amounts reclassified from accumulated other comprehensive (loss) income, net of taxes — ( 11 ) ( 38 ) ( 49 ) Balance at March 31, 2023 $ ( 985 ) $ ( 7 ) $ 218 $ ( 774 ) Current-period other comprehensive (loss) income 46 — — 46 Amounts reclassified from accumulated other comprehensive loss, net of taxes — 7 ( 11 ) ( 4 ) Balance at March 31, 2024 $ ( 939 ) $ — $ 207 $ ( 732 ) Current-period other comprehensive (loss) income ( 9 ) ( 10 ) — ( 19 ) Amounts reclassified from accumulated other comprehensive loss, net of taxes — 3 ( 14 ) ( 11 ) Balance at March 31, 2025 $ ( 948 ) $ ( 7 ) $ 193 $ ( 762 ) Note 16 - Stock Incentive Plans Equity Plans The Compensation Committee of the Board has broad authority to grant awards and otherwise administer the DXC Employee Equity Plan. The plan became effective March 30, 2017 and will continue in effect for a period of 10 years thereafter, unless terminated earlier by the Board. The Board has the authority to amend the plan in such respects as it deems desirable, subject to approval of DXC’s stockholders for material modifications. Restricted stock units ("RSUs") represent the right to receive one share of DXC common stock upon a future settlement date, subject to vesting and other terms and conditions of the award, plus any dividend equivalents accrued during the award period. The RSU’s vest one-third ratably over a three-year period. In general, if the employee’s status as a full-time employee is terminated prior to the vesting of the RSU grant in full, then the RSU grant is automatically canceled on the termination date and any unvested shares and dividend equivalents are forfeited. Certain executives were awarded service-based "career share" RSUs for which the shares are settled over the 10 anniversaries following the executive's separation from service as a full-time employee, provided the executive complies with certain non-competition covenants during that period. 107 The Company also grants PSUs, which generally vest at the end of a three-year period. The number of PSUs that ultimately vest is dependent upon the Company’s achievement of certain specified financial performance criteria over a three-year period. If the specified performance criteria are met, awards are settled for shares of DXC common stock and dividend equivalents shortly subsequent to the end of the performance period, subject to continued employment through the last day of the third fiscal year. DXC also issued PSU awards that are considered to have a market condition. Settlement of shares for these PSU awards will be made shortly subsequent to the end of third fiscal year, subject to certain market conditions and continued employment through the last day of the third fiscal year. The terms of the DXC Director Equity Plan allow DXC to grant RSU awards to non-employee directors of DXC. Such RSU awards vest in full at the earlier of (i) the first anniversary of the grant date or (ii) the next annual meeting date, and are automatically redeemed for DXC common stock and dividend equivalents either at that time or, if an RSU deferral election form is submitted, upon the date or event elected by the director. Distributions made upon a director’s separation from the Board may occur in either a lump sum or in annual installments over periods of 5 , 10 , or 15 years, per the director’s election. In addition, RSUs vest in full upon a change in control of DXC. The Board has reserved for issuance shares of DXC common stock, par value $ 0.01 per share, under each of the plans as detailed below: As of March 31, 2025 Reserved for issuance Available for future grants DXC Employee Equity Plan 51,200,000 20,627,115 DXC Director Equity Plan 745,000 528,856 Total 51,945,000 21,155,971 The Company recognized share-based compensation expense for fiscal 2025, 2024 and 2023 as follows: Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Total share-based compensation cost $ 79 $ 109 $ 108 Related income tax benefit $ 13 $ 16 $ 18 Total intrinsic value of options exercised $ — $ — $ 1 Tax benefits from exercised stock options and awards $ 8 $ 14 $ 12 As of March 31, 2025, total unrecognized compensation expense related to unvested DXC RSUs and PSUs, net of expected forfeitures was $ 104 million, respectively. The unrecognized compensation expense for unvested RSUs and PSUs is expected to be recognized over a weighted-average period of 1.75 years. 108 Stock Options The Company’s stock options vest one-third annually on each of the first three anniversaries of the grant date. Stock options are generally granted for a term of ten years . Information concerning stock options granted under stock incentive plans was as follows: Number of Option Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in millions) Outstanding as of March 31, 2022 1,111,387 $ 33.47 3.01 $ 5 Granted — $ — Exercised ( 69,855 ) $ 20.03 $ 1 Canceled/Forfeited — $ — Expired ( 48,829 ) $ 44.10 Outstanding as of March 31, 2023 992,703 $ 33.89 2.20 $ — Granted — $ — Exercised ( 15,278 ) $ 18.79 Canceled/Forfeited — $ — Expired ( 32,366 ) $ 30.75 Outstanding and exercisable as of March 31, 2024 945,059 $ 34.25 1.27 $ — Granted — $ — Exercised — $ — Canceled/Forfeited — $ — Expired ( 441,480 ) $ 31.88 Outstanding and exercisable as of March 31, 2025 503,579 $ 36.32 0.77 $ — As of March 31, 2025 Options Outstanding Options Exercisable Range of Option Exercise Price Number Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Term Number Exercisable Weighted Average Exercise Price $ 21.49 - $ 26.58 232,216 $ 26.54 0.15 232,216 $ 26.54 $ 26.59 - $ 42.59 215,629 $ 42.56 1.16 215,629 $ 42.56 $ 42.60 - $ 53.41 55,734 $ 52.91 1.78 55,734 $ 52.91 503,579 503,579 109 Restricted Stock Information concerning RSUs and PSUs granted under the stock incentive plans was as follows: Number of Shares Weighted Average Grant Date Fair Value Outstanding as of March 31, 2022 7,477,126 $ 35.89 Granted 3,404,395 $ 38.08 Released/Issued ( 2,252,627 ) $ 33.10 Canceled/Forfeited ( 1,179,515 ) $ 36.34 Outstanding as of March 31, 2023 7,449,379 $ 37.11 Granted 6,033,909 $ 24.73 Released/Issued ( 4,066,367 ) $ 23.71 Canceled/Forfeited ( 1,105,628 ) $ 40.20 Outstanding as of March 31, 2024 8,311,293 $ 33.97 Granted 7,213,047 $ 21.66 Released/Issued ( 3,310,300 ) $ 47.45 Canceled/Forfeited ( 3,140,299 ) $ 25.30 Outstanding as of March 31, 2025 9,073,741 $ 22.23 . Non-employee Director Incentives Information concerning RSUs granted to non-employee directors was as follows: Number of Shares Weighted Average Grant Date Fair Value Outstanding as of March 31, 2022 156,722 $ 36.18 Granted 66,100 $ 31.29 Released/Issued ( 75,335 ) $ 32.62 Canceled/Forfeited — $ — Outstanding as of March 31, 2023 147,487 $ 35.80 Granted 135,457 $ 19.52 Released/Issued ( 69,189 ) $ 31.68 Canceled/Forfeited — $ — Outstanding as of March 31, 2024 213,755 $ 26.82 Granted 131,238 $ 19.42 Released/Issued ( 143,976 ) $ 20.34 Canceled/Forfeited — $ — Outstanding as of March 31, 2025 201,017 $ 26.63 110 Note 17 - Cash Flows Cash payments for interest on indebtedness and income taxes and other select non-cash activities are as follows: Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Cash paid for: Interest $ 258 $ 286 $ 188 Taxes on income, net of refunds (1) $ 393 $ 434 $ 408 Non-cash activities: Operating: ROU assets obtained in exchange for lease, net (2) $ 241 $ 175 $ 227 Prepaid assets acquired under long-term financing $ — $ 46 $ 106 Investing: Capital expenditures in accounts payable and accrued expenses $ 1 $ 67 $ 5 Capital expenditures through finance lease obligations $ 24 $ 105 $ 102 Assets acquired under long-term financing $ — $ 34 $ 25 Financing: Shares repurchased but not settled in cash (3) $ — $ 10 $ 20 (1) Income tax refunds were $ 50 million, $ 38 million, and $ 43 million for fiscal 2025, 2024, and 2023, respectively. (2) There were $ 703 million, $ 880 million, and $ 1,142 million in modifications and terminations in fiscal 2025, 2024, and 2023, respectively. (3) On August 16, 2022, the U.S. government enacted the IRA into law. The IRA imposes a 1% excise tax on share repurchases completed after December 31, 2022. In our cash flow statement, we reflect the excise tax as a financing activity relating to the repurchase of common stock. Note 18 - Other (Income) Expense, Net Other (income) expense, net comprises non-service cost components of net periodic pension income, pension and OPEB actuarial and settlement (gains) losses, movement in foreign currency exchange rates on our foreign currency denominated assets and liabilities and the related economic hedges, losses (gains) on real estate and facility sales, and other miscellaneous (gains) and losses. The following table summarizes components of other (income) expense, net: Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Non-service cost components of net periodic pension income $ ( 160 ) $ ( 145 ) $ ( 251 ) Pension and OPEB actuarial and settlement (gains) losses ( 232 ) 445 1,431 Foreign currency gains ( 4 ) ( 7 ) ( 15 ) Loss (gain) on real estate and facility sales 23 ( 7 ) ( 21 ) Other miscellaneous (gains) and losses ( 3 ) ( 68 ) ( 60 ) Total $ ( 376 ) $ 218 $ 1,084 Note 19 - Segment and Geographic Information DXC has a matrix form of organization and is managed in several different and overlapping groupings including services, industries and geographic regions. As a result, and in accordance with accounting standards, operating segments are organized by the type of services provided. Our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") serve as our Chief Operating Decision Makers ("CODM") and are responsible for obtaining, reviewing, and managing the Company’s financial performance based on these segments. 111 Global Business Services ("GBS") provides innovative technology solutions that help our customers address key business challenges and accelerate transformations tailored to each customer’s industry and specific objectives. Global Infrastructure Services ("GIS") provides a portfolio of technology offerings that deliver predictable outcomes and measurable results while reducing business risk and operational costs for customers. The Company's CODM uses segment profit to measure operational strength and performance, assist in evaluation of underlying trends, and allocate resources through periodic budget and forecasting processes. Segment profit is defined as segment revenues less costs of services, selling, general and administrative, depreciation and amortization, and other segment items. The Company allocates certain costs such as real estate costs, information technology costs and costs for certain other shared corporate functions to it segments using a proportional share of either revenue or headcount for each segment. The Company does not allocate to its segments certain operating expenses managed at the corporate level. These unallocated expenses generally include certain corporate function costs, stock-based compensation expense, pension and OPEB actuarial and settlement gains and losses, restructuring costs, transaction, separation, and integration-related costs, amortization of acquired intangible assets, impairment losses, gains/(losses) on dispositions of businesses, gains/(losses) on real estate and facility sales, and other costs that do not reflect ongoing segment operating performance. Segment Measures The following table summarizes operating results regularly provided to the CODM by reportable segment and a reconciliation to the financial statements: (in millions) GBS GIS Total Reportable Segments Fiscal Year Ended March 31, 2025 Revenues $ 6,646 $ 6,225 $ 12,871 Costs of services ( 5,081 ) ( 4,703 ) ( 9,784 ) Selling, general and administrative ( 630 ) ( 417 ) ( 1,047 ) Depreciation and amortization (1) ( 162 ) ( 686 ) ( 848 ) Other segment items (2) 24 32 56 Segment Profit $ 797 $ 451 $ 1,248 Fiscal Year Ended March 31, 2024 Revenues $ 6,820 $ 6,847 $ 13,667 Costs of services ( 5,226 ) ( 5,332 ) ( 10,558 ) Selling, general and administrative ( 603 ) ( 384 ) ( 987 ) Depreciation and amortization (1) ( 186 ) ( 759 ) ( 945 ) Other segment items (2) 30 61 91 Segment Profit $ 835 $ 433 $ 1,268 Fiscal Year Ended March 31, 2023 Revenues $ 6,960 $ 7,470 $ 14,430 Costs of services ( 5,237 ) ( 5,720 ) ( 10,957 ) Selling, general and administrative ( 710 ) ( 539 ) ( 1,249 ) Depreciation and amortization (1) ( 165 ) ( 853 ) ( 1,018 ) Other segment items (2) 64 134 198 Segment Profit $ 912 $ 492 $ 1,404 112 (1) Depreciation and amortization as presented excludes amortization of acquired intangible assets. (2) Other segment items as presented includes non-service cost components of net periodic pension income and other miscellaneous segment gains/(losses). Reconciliation of Reportable Segment Profit to Consolidation Fiscal Years Ended (in millions) March 31, 2025 March 31, 2024 March 31, 2023 Total profit for reportable segments $ 1,248 $ 1,268 $ 1,404 Unallocated expenses ( 229 ) ( 259 ) ( 268 ) Subtotal $ 1,019 $ 1,009 $ 1,136 Interest income 199 214 135 Interest expense ( 265 ) ( 298 ) ( 200 ) Restructuring costs ( 153 ) ( 111 ) ( 216 ) Transaction, separation and integration-related costs ( 25 ) ( 7 ) ( 16 ) Amortization of acquired intangibles ( 348 ) ( 354 ) ( 402 ) Merger related indemnification ( 2 ) ( 16 ) ( 46 ) SEC matter — — ( 8 ) Gains on dispositions 13 115 190 (Losses) gains on real estate and facility sales ( 23 ) 7 21 Arbitration loss — — ( 29 ) Impairment losses ( 17 ) ( 5 ) ( 19 ) Pension and OPEB actuarial and settlement gains (losses) 232 ( 445 ) ( 1,431 ) Income (loss) before income taxes $ 630 $ 109 $ ( 885 ) Management does not use total assets by segment to evaluate segment performance or allocate resources. As a result, assets are not tracked by segment and therefore, total assets by segment are not disclosed. Geographic Information See Note 11 - "Revenue" for the Company's revenue by geography. Property and equipment, net, which is based on the physical location of the assets, was as follows: As of (in millions) March 31, 2025 March 31, 2024 United States $ 398 $ 658 United Kingdom 317 325 Australia 34 55 Other Europe 236 293 Other International 268 340 Total Property and Equipment, net $ 1,253 $ 1,671 No single customer exceeded 10% of the Company’s revenues during fiscal 2025, fiscal 2024 or fiscal 2023. 113 Note 20 - Commitments and Contingencies Commitments The Company signed long-term purchase agreements with certain software, hardware, telecommunication and other service providers to obtain favorable pricing and terms for services and products that are necessary for the operations of business activities. Under the terms of these agreements, the Company is contractually committed to purchase specified minimum amounts within defined time periods. If the Company does not meet the specified minimums, the Company would have an obligation to pay the service provider all, or a portion, of the shortfall. Minimum purchase commitments as of March 31, 2025 were as follows: Fiscal year Minimum Purchase Commitment (in millions) 2026 $ 633 2027 304 2028 146 2029 64 2030 25 Total $ 1,172 In the normal course of business, the Company may provide certain customers with financial performance guarantees, and at times performance letters of credit or surety bonds. In general, the Company would only be liable for the amounts of these guarantees in the event that non-performance by the Company permits termination of the related contract by the Company’s customer. The Company believes it is in compliance with its performance obligations under all service contracts for which there is a financial performance guarantee, and the ultimate liability, if any, incurred in connection with these guarantees will not have a material adverse effect on its consolidated results of operations or financial position. The Company also uses stand-by letters of credit, in lieu of cash, to support various risk management insurance policies. These letters of credit represent a contingent liability and the Company would only be liable if it defaults on its payment obligations on these policies. The following table summarizes the expiration of the Company’s financial guarantees and stand-by letters of credit outstanding as of March 31, 2025: (in millions) Fiscal 2026 Fiscal 2027 Fiscal 2028 and Thereafter Totals Surety bonds $ 241 $ 22 $ 156 $ 419 Letters of credit 52 15 440 507 Stand-by letters of credit 60 2 4 66 Totals $ 353 $ 39 $ 600 $ 992 The Company generally indemnifies licensees of its proprietary software products against claims brought by third parties alleging infringement of their intellectual property rights, including rights in patents (with or without geographic limitations), copyrights, trademarks and trade secrets. DXC’s indemnification of its licensees relates to costs arising from court awards, negotiated settlements, and the related legal and internal costs of those licensees. The Company maintains the right, at its own cost, to modify or replace software in order to eliminate any infringement. The Company has not incurred any significant costs related to licensee software indemnification. 114 Contingencies Securities Litigation: On August 20, 2019, a purported class action lawsuit was filed in the Superior Court of the State of California, County of Santa Clara, against the Company, directors of the Company, and a former officer of the Company, among other defendants. The action asserts claims under Sections 11, 12 and 15 of the Securities Act of 1933, as amended, and is premised on allegedly false and/or misleading statements, and alleged non-disclosure of material facts, regarding the Company’s prospects and expected performance. The putative class of plaintiffs includes former shareholders of Computer Sciences Corporation (“CSC”) who exchanged their CSC shares for the Company’s common stock pursuant to the offering documents filed with the Securities and Exchange Commission in connection with the April 2017 transaction that formed DXC. The State of California action had been stayed pending the outcome of the substantially similar federal action filed in the United States District Court for the Northern District of California. The federal action was dismissed with prejudice in December 2021. Thereafter, the state court lifted the stay and entered an order permitting additional briefing by the parties. In March 2022, Plaintiffs filed an amended complaint, which the Company moved to dismiss. In August 2022, the Court granted the Company’s motion to dismiss, but permitted Plaintiffs to amend and refile their complaint. In September 2022, Plaintiffs filed a second amended complaint, which the Company moved to dismiss. In January 2023, the Court issued an order denying the Company’s motion to dismiss the second amended complaint. In March 2023, the Court entered a scheduling order setting a trial date for September 2025. The trial date has since been extended to May 2026. In May 2024, the Court entered an order granting Plaintiffs’ motion for class certification. In July 2024, notice was provided to potential class members. The case is otherwise in discovery. On August 2, 2024, a purported class action lawsuit was filed in the United States District Court for the Eastern District of Virginia against the Company and certain of its current and former officers. The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and is premised on allegedly false and/or misleading statements regarding the Company’s transformation journey. The putative class of plaintiffs includes investors who acquired DXC stock during the period of May 26, 2021 to May 16, 2024. In March 2025, the Court entered an order granting the Company’s motion to dismiss the lawsuit and closing the case. In April 2025, the deadline to file an appeal passed and no appeal was filed. The matter is now closed. After the filing of the August 2024 securities class action, five shareholder derivative suits were filed against the Company’s Board of Directors and certain of its current and former officers, alleging a breach of fiduciary duties arising from the claims asserted in the August 2024 securities class action. Three derivative suits were filed in the United States District Court for the Eastern District of Virginia, and two derivative suits were filed in the District Court of the State of Nevada, Clark County. All of the derivative suits had been temporarily stayed, pending an outcome in the August 2024 securities class action. With the securities class action now dismissed and the matter closed, three of the five derivative suits have been voluntarily dismissed, including the two derivative suits pending in District Court of the State of Nevada, Clark County, and one of the derivative suits pending in the United States District Court for the Eastern District of Virginia. The Company is pursuing dismissal of the two remaining derivative suits. The Company believes that the lawsuits described above are without merit, and intends to vigorously defend all claims asserted. Tax Examinations: The Company is under IRS examination in the U.S. on its federal income tax returns for certain fiscal years and is in disagreement with the IRS on certain tax positions, which are currently being contested in the U.S. Tax Court. For more detail, see Note 14 - "Income Taxes." 115 TCS Litigation: In April 2019, the Company filed a lawsuit against Tata Consultancy Services Limited ("TCS") and Tata America International Corporation alleging misappropriation of certain of the Company’s trade secrets. In November 2023, a trial was held in the United States District Court for the Northern District of Texas, and a jury found TCS liable for misappropriating the Company’s trade secrets and awarded the Company $ 70 million in compensatory damages and $ 140 million in punitive damages, for a total award of $ 210 million. In June 2024, the Court entered a final order in the case, affirming the jury’s verdict in the Company’s favor and revising the monetary award to $ 56 million in compensatory damages and $ 112 million in punitive damages. The Court also awarded the Company $ 26 million in prejudgment interest, post-judgment interest at an annual rate of 4.824 %, and its attorney’s fees and costs, in an amount to be determined in a later order. The total award to the Company is $ 194 million, plus its attorney’s fees and costs. The Court also issued a permanent injunction enjoining TCS from, among other things, possessing, accessing, or using any of the Company’s trade secrets that were at issue in the case, and appointing a monitor to confirm, among other things, that TCS does not do so. In August 2024, TCS filed a Notice of Appeal to the U.S. Court of Appeals for the Fifth Circuit. In April 2025, the Court of Appeals heard oral argument on the appeal. A decision from the Court of Appeals is pending. The Company has not recognized any portion of the award in its financial statements and will continue to monitor the progress of the case. In addition to the matters noted above, the Company is currently subject in the normal course of business to various claims and contingencies arising from, among other things, disputes with customers, vendors, employees, contract counterparties and other parties, as well as securities matters, environmental matters, matters concerning the licensing and use of intellectual property, and inquiries and investigations by regulatory authorities and government agencies. Some of these disputes involve or may involve litigation. The financial statements reflect the treatment of claims and contingencies based on management’s view of the expected outcome. DXC consults with outside legal counsel on issues related to litigation and regulatory compliance and seeks input from other experts and advisors with respect to matters in the ordinary course of business. Although the outcome of these and other matters cannot be predicted with certainty, and the impact of the final resolution of these and other matters on the Company’s results of operations in a particular subsequent reporting period could be material and adverse, management does not believe based on information currently available to the Company, that the resolution of any of the matters currently pending against the Company will have a material adverse effect on the financial position of the Company or the ability of the Company to meet its financial obligations as they become due. Unless otherwise noted, the Company is unable to determine at this time a reasonable estimate of a possible loss or range of losses associated with the foregoing disclosed contingent matters. 116 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.